Correlation Between Amazon and Hanza AB

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

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

Diversification Opportunities for Amazon and Hanza AB

0.73

Correlation Coefficient

Amazon  Hanza AB

Poor diversification

The 3 months correlation between Amazon and Hanza is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Hanza AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanza AB 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 Hanza AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanza AB has no effect on the direction of Amazon i.e., Amazon and Hanza AB go up and down completely randomly.

Pair Corralation between Amazon and Hanza AB

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.58 times more return on investment than Hanza AB. However, Amazon Inc is 1.73 times less risky than Hanza AB. It trades about 0.2 of its potential returns per unit of risk. Hanza AB is currently generating about 0.09 per unit of risk. If you would invest  18,700  in Amazon Inc on September 12, 2024 and sell it today you would earn a total of  4,318  from holding Amazon Inc or generate 23.09% return on investment over 90 days.

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

Amazon Inc  vs.  Hanza AB

Amazon Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 15 (%) 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.

Hanza AB

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Amazon and Hanza AB

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

The idea behind Amazon Inc and Hanza AB 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.