Correlation Between CryoLife and Amazon

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

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

Diversification Opportunities for CryoLife and Amazon

0.89

Correlation Coefficient

CryoLife  Amazon

Very poor diversification

The 3 months correlation between CryoLife and Amazon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CryoLife and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and CryoLife 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 CryoLife are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of CryoLife i.e., CryoLife and Amazon go up and down completely randomly.

Pair Corralation between CryoLife and Amazon

Assuming the 90 days horizon CryoLife is expected to generate 1.42 times less return on investment than Amazon. In addition to that, CryoLife is 1.14 times more volatile than Amazon Inc. It trades about 0.16 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.26 per unit of volatility. If you would invest  17,028  in Amazon Inc on September 26, 2024 and sell it today you would earn a total of  4,667  from holding Amazon Inc or generate 27.41% return on investment over 90 days.

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

CryoLife  vs.  Amazon Inc

CryoLife

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CryoLife and Amazon

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

The idea behind CryoLife and Amazon Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.