Correlation Between Amazon and Pet Valu

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

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

Diversification Opportunities for Amazon and Pet Valu

0.58

Correlation Coefficient

Amazon  Pet Valu

Very weak diversification

The 3 months correlation between Amazon and Pet is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Pet Valu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Valu Holdings 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 Pet Valu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Valu Holdings has no effect on the direction of Amazon i.e., Amazon and Pet Valu go up and down completely randomly.

Pair Corralation between Amazon and Pet Valu

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.28 times more return on investment than Pet Valu. However, Amazon is 1.28 times more volatile than Pet Valu Holdings. It trades about 0.16 of its potential returns per unit of risk. Pet Valu Holdings is currently generating about 0.14 per unit of risk. If you would invest  17,625  in Amazon Inc on September 3, 2024 and sell it today you would earn a total of  3,446  from holding Amazon Inc or generate 19.55% return on investment over 90 days.

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

Amazon Inc  vs.  Pet Valu Holdings

Amazon Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 12 (%) 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.

Pet Valu Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pet Valu Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pet Valu displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Pet Valu

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

The idea behind Amazon Inc and Pet Valu Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.