Correlation Between Amazon and Ocular Therapeutix

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

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

Diversification Opportunities for Amazon and Ocular Therapeutix

0.35

Correlation Coefficient

Amazon  Ocular Therapeutix

Weak diversification

The 3 months correlation between Amazon and Ocular is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Ocular Therapeutix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocular Therapeutix 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 Ocular Therapeutix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocular Therapeutix has no effect on the direction of Amazon i.e., Amazon and Ocular Therapeutix go up and down completely randomly.

Pair Corralation between Amazon and Ocular Therapeutix

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.53 times more return on investment than Ocular Therapeutix. However, Amazon Inc is 1.89 times less risky than Ocular Therapeutix. It trades about 0.18 of its potential returns per unit of risk. Ocular Therapeutix is currently generating about 0.08 per unit of risk. If you would invest  17,333  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  3,738  from holding Amazon Inc or generate 21.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Amazon Inc  vs.  Ocular Therapeutix

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.

Ocular Therapeutix

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Ocular Therapeutix disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Ocular Therapeutix

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

The idea behind Amazon Inc and Ocular Therapeutix 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.