Correlation Between Amazon and Enjoei SA

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

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

Diversification Opportunities for Amazon and Enjoei SA

-0.68

Correlation Coefficient

Amazon  Enjoei SA

Excellent diversification

The 3 months correlation between Amazon and Enjoei is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Enjoei SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enjoei SA 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 Enjoei SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enjoei SA has no effect on the direction of Amazon i.e., Amazon and Enjoei SA go up and down completely randomly.

Pair Corralation between Amazon and Enjoei SA

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.38 times more return on investment than Enjoei SA. However, Amazon Inc is 2.62 times less risky than Enjoei SA. It trades about 0.24 of its potential returns per unit of risk. Enjoei SA is currently generating about -0.04 per unit of risk. If you would invest  5,281  in Amazon Inc on September 24, 2024 and sell it today you would earn a total of  1,589  from holding Amazon Inc or generate 30.09% return on investment over 90 days.

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

Amazon Inc  vs.  Enjoei SA

Amazon Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 19 (%) 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.

Enjoei SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enjoei SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Amazon and Enjoei SA

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

The idea behind Amazon Inc and Enjoei SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.