Correlation Between Amazon and I Sheng

Can any of the company-specific risk be diversified away by investing in both Amazon and I Sheng at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amazon and I Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and I Sheng Electric Wire, you can compare the effects of market volatilities on Amazon and I Sheng and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amazon with a short position of I Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and I Sheng.

Diversification Opportunities for Amazon and I Sheng

0.5

Correlation Coefficient

Amazon  I Sheng

Very weak diversification

The 3 months correlation between Amazon and 6115 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and I Sheng Electric Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Sheng Electric and Amazon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amazon Inc are associated (or correlated) with I Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Sheng Electric has no effect on the direction of Amazon i.e., Amazon and I Sheng go up and down completely randomly.

Pair Corralation between Amazon and I Sheng

Given the investment horizon of 90 days Amazon Inc is expected to generate 3.64 times more return on investment than I Sheng. However, Amazon is 3.64 times more volatile than I Sheng Electric Wire. It trades about 0.15 of its potential returns per unit of risk. I Sheng Electric Wire is currently generating about 0.0 per unit of risk. If you would invest  17,625  in Amazon Inc on September 3, 2024 and sell it today you would earn a total of  3,164  from holding Amazon Inc or generate 17.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Amazon Inc  vs.  I Sheng Electric Wire

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

I Sheng Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days I Sheng Electric Wire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, I Sheng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Amazon and I Sheng

The main advantage of trading using opposite Amazon and I Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, I Sheng can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in I Sheng will offset losses from the drop in I Sheng's long position.

The idea behind Amazon Inc and I Sheng Electric Wire pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.