Correlation Between Amazon and ZW Data

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

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

Diversification Opportunities for Amazon and ZW Data

-0.41

Correlation Coefficient

Amazon  ZW Data

Very good diversification

The 3 months correlation between Amazon and CNET is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and ZW Data Action in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZW Data Action 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 ZW Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZW Data Action has no effect on the direction of Amazon i.e., Amazon and ZW Data go up and down completely randomly.

Pair Corralation between Amazon and ZW Data

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.41 times more return on investment than ZW Data. However, Amazon Inc is 2.44 times less risky than ZW Data. It trades about 0.23 of its potential returns per unit of risk. ZW Data Action is currently generating about -0.05 per unit of risk. If you would invest  19,578  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  1,766  from holding Amazon Inc or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  ZW Data Action

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) 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.

ZW Data Action

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ZW Data Action are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, ZW Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and ZW Data

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

The idea behind Amazon Inc and ZW Data Action 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.