Correlation Between Amazon and Avance Gas

Can any of the company-specific risk be diversified away by investing in both Amazon and Avance Gas 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 Avance Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and Avance Gas Holding, you can compare the effects of market volatilities on Amazon and Avance Gas 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 Avance Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Avance Gas.

Diversification Opportunities for Amazon and Avance Gas

-0.04

Correlation Coefficient

Amazon  Avance Gas

Good diversification

The 3 months correlation between Amazon and Avance is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Avance Gas Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avance Gas Holding 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 Avance Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avance Gas Holding has no effect on the direction of Amazon i.e., Amazon and Avance Gas go up and down completely randomly.

Pair Corralation between Amazon and Avance Gas

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.76 times more return on investment than Avance Gas. However, Amazon Inc is 1.31 times less risky than Avance Gas. It trades about 0.19 of its potential returns per unit of risk. Avance Gas Holding is currently generating about 0.03 per unit of risk. If you would invest  17,789  in Amazon Inc on September 5, 2024 and sell it today you would earn a total of  4,027  from holding Amazon Inc or generate 22.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Amazon Inc  vs.  Avance Gas Holding

Amazon Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) 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.

Avance Gas Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avance Gas Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Avance Gas is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Amazon and Avance Gas

The main advantage of trading using opposite Amazon and Avance Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Avance Gas 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 Avance Gas will offset losses from the drop in Avance Gas' long position.

The idea behind Amazon Inc and Avance Gas Holding 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.