Correlation Between Amazon and Trinity Biotech

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

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

Diversification Opportunities for Amazon and Trinity Biotech

-0.38

Correlation Coefficient

Amazon  Trinity Biotech

Very good diversification

The 3 months correlation between Amazon and Trinity is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Trinity Biotech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity Biotech plc 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 Trinity Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Biotech plc has no effect on the direction of Amazon i.e., Amazon and Trinity Biotech go up and down completely randomly.

Pair Corralation between Amazon and Trinity Biotech

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.3 times more return on investment than Trinity Biotech. However, Amazon Inc is 3.33 times less risky than Trinity Biotech. It trades about 0.15 of its potential returns per unit of risk. Trinity Biotech plc is currently generating about -0.1 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  3,164  from holding Amazon Inc or generate 17.95% return on investment over 90 days.

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

Amazon Inc  vs.  Trinity Biotech plc

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

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.

Trinity Biotech plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trinity Biotech plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Amazon and Trinity Biotech

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

The idea behind Amazon Inc and Trinity Biotech plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.