Correlation Between Amazon and LightInTheBox Holding
Can any of the company-specific risk be diversified away by investing in both Amazon and LightInTheBox Holding 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 LightInTheBox Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and LightInTheBox Holding Co, you can compare the effects of market volatilities on Amazon and LightInTheBox Holding 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 LightInTheBox Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and LightInTheBox Holding.
Diversification Opportunities for Amazon and LightInTheBox Holding
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and LightInTheBox is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and LightInTheBox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightInTheBox Holding 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 LightInTheBox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightInTheBox Holding has no effect on the direction of Amazon i.e., Amazon and LightInTheBox Holding go up and down completely randomly.
Pair Corralation between Amazon and LightInTheBox Holding
Given the investment horizon of 90 days Amazon Inc is expected to under-perform the LightInTheBox Holding. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 4.66 times less risky than LightInTheBox Holding. The stock trades about -0.06 of its potential returns per unit of risk. The LightInTheBox Holding Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 71.00 in LightInTheBox Holding Co on January 25, 2024 and sell it today you would earn a total of 1.16 from holding LightInTheBox Holding Co or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. LightInTheBox Holding Co
Performance |
| Timeline |
| Amazon Inc |
| LightInTheBox Holding |
Amazon and LightInTheBox Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and LightInTheBox Holding
The main advantage of trading using opposite Amazon and LightInTheBox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, LightInTheBox Holding 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 LightInTheBox Holding will offset losses from the drop in LightInTheBox Holding's long position.The idea behind Amazon Inc and LightInTheBox Holding Co 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.| LightInTheBox Holding vs. Pinduoduo | LightInTheBox Holding vs. Sea | LightInTheBox Holding vs. MercadoLibre | LightInTheBox Holding vs. Alibaba Group Holding |
Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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