Correlation Between Amazon and DocuSign

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

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

Diversification Opportunities for Amazon and DocuSign

0.95

Correlation Coefficient

Amazon  DocuSign

Almost no diversification

The 3 months correlation between Amazon and DocuSign is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and DocuSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DocuSign 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 DocuSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DocuSign has no effect on the direction of Amazon i.e., Amazon and DocuSign go up and down completely randomly.

Pair Corralation between Amazon and DocuSign

Assuming the 90 days trading horizon Amazon is expected to generate 1.86 times less return on investment than DocuSign. But when comparing it to its historical volatility, Amazon Inc is 2.46 times less risky than DocuSign. It trades about 0.3 of its potential returns per unit of risk. DocuSign is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,711  in DocuSign on September 27, 2024 and sell it today you would earn a total of  1,247  from holding DocuSign or generate 72.88% return on investment over 90 days.

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

Amazon Inc  vs.  DocuSign

Amazon Inc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amazon sustained solid returns over the last few months and may actually be approaching a breakup point.

DocuSign

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DocuSign are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DocuSign sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and DocuSign

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

The idea behind Amazon Inc and DocuSign 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.