Correlation Between Amazon and Niagara Mohawk

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

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

Diversification Opportunities for Amazon and Niagara Mohawk

0.64

Correlation Coefficient

Amazon  Niagara Mohawk

Poor diversification

The 3 months correlation between Amazon and Niagara is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Amazon i.e., Amazon and Niagara Mohawk go up and down completely randomly.

Pair Corralation between Amazon and Niagara Mohawk

If you would invest  19,273  in Amazon Inc on August 31, 2024 and sell it today you would earn a total of  1,301  from holding Amazon Inc or generate 6.75% return on investment over 90 days.

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

Amazon Inc  vs.  Niagara Mohawk Power

Amazon Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) 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.

Niagara Mohawk Power

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Niagara Mohawk may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Amazon and Niagara Mohawk

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

The idea behind Amazon Inc and Niagara Mohawk Power 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.