Correlation Between Amazon and Data Storage

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

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

Diversification Opportunities for Amazon and Data Storage

0.04

Correlation Coefficient

Amazon  Data Storage

Significant diversification

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

Pair Corralation between Amazon and Data Storage

Given the investment horizon of 90 days Amazon is expected to generate 4.44 times less return on investment than Data Storage. But when comparing it to its historical volatility, Amazon Inc is 7.94 times less risky than Data Storage. It trades about 0.18 of its potential returns per unit of risk. Data Storage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Data Storage on September 12, 2024 and sell it today you would earn a total of  18.99  from holding Data Storage or generate 33.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Amazon Inc  vs.  Data Storage

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.

Data Storage

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Data Storage showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Data Storage

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

The idea behind Amazon Inc and Data Storage 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.