Correlation Between Amazon and Fidelity Advisor

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

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

Diversification Opportunities for Amazon and Fidelity Advisor

0.85

Correlation Coefficient

Amazon  Fidelity Advisor

Very poor diversification

The 3 months correlation between Amazon and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Fidelity Advisor Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Large 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Large has no effect on the direction of Amazon i.e., Amazon and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Amazon and Fidelity Advisor

Given the investment horizon of 90 days Amazon Inc is expected to generate 2.64 times more return on investment than Fidelity Advisor. However, Amazon is 2.64 times more volatile than Fidelity Advisor Large. It trades about 0.23 of its potential returns per unit of risk. Fidelity Advisor Large is currently generating about 0.32 per unit of risk. If you would invest  17,139  in Amazon Inc on September 6, 2024 and sell it today you would earn a total of  4,677  from holding Amazon Inc or generate 27.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Fidelity Advisor Large

Amazon Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 17 (%) 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.

Fidelity Advisor Large

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Large are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Fidelity Advisor

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

The idea behind Amazon Inc and Fidelity Advisor Large 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.