Correlation Between Amazon and Safestore Holdings

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

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

Diversification Opportunities for Amazon and Safestore Holdings

-0.58

Correlation Coefficient

Amazon  Safestore Holdings

Excellent diversification

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

Pair Corralation between Amazon and Safestore Holdings

Given the investment horizon of 90 days Amazon is expected to generate 2.72 times less return on investment than Safestore Holdings. But when comparing it to its historical volatility, Amazon Inc is 1.14 times less risky than Safestore Holdings. It trades about 0.06 of its potential returns per unit of risk. Safestore Holdings plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  926.00  in Safestore Holdings plc on February 3, 2024 and sell it today you would earn a total of  59.00  from holding Safestore Holdings plc or generate 6.37% return on investment over 90 days.

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

Amazon Inc  vs.  Safestore Holdings plc

Amazon Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Safestore Holdings plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safestore Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Amazon and Safestore Holdings

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

The idea behind Amazon Inc and Safestore Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.