Correlation Between Amazon and Biztech Konsulting

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

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

Diversification Opportunities for Amazon and Biztech Konsulting

0.27

Correlation Coefficient

Amazon  Biztech Konsulting

Modest diversification

The 3 months correlation between Amazon and Biztech is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Biztech Konsulting SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biztech Konsulting 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 Biztech Konsulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biztech Konsulting has no effect on the direction of Amazon i.e., Amazon and Biztech Konsulting go up and down completely randomly.

Pair Corralation between Amazon and Biztech Konsulting

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.38 times more return on investment than Biztech Konsulting. However, Amazon Inc is 2.63 times less risky than Biztech Konsulting. It trades about 0.19 of its potential returns per unit of risk. Biztech Konsulting SA is currently generating about 0.07 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 Together
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

Amazon Inc  vs.  Biztech Konsulting SA

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.

Biztech Konsulting

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biztech Konsulting SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Biztech Konsulting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Biztech Konsulting

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

The idea behind Amazon Inc and Biztech Konsulting SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.