Correlation Between Amazon and Metalert

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

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

Diversification Opportunities for Amazon and Metalert

0.48

Correlation Coefficient

Amazon  Metalert

Very weak diversification

The 3 months correlation between Amazon and Metalert is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Metalert in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalert 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 Metalert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalert has no effect on the direction of Amazon i.e., Amazon and Metalert go up and down completely randomly.

Pair Corralation between Amazon and Metalert

Given the investment horizon of 90 days Amazon is expected to generate 4.35 times less return on investment than Metalert. But when comparing it to its historical volatility, Amazon Inc is 8.14 times less risky than Metalert. It trades about 0.1 of its potential returns per unit of risk. Metalert is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Metalert on September 4, 2024 and sell it today you would lose (28.00) from holding Metalert or give up 84.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Amazon Inc  vs.  Metalert

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.

Metalert

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalert are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Metalert unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Metalert

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

The idea behind Amazon Inc and Metalert 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.