Correlation Between Associated Capital and Amazon

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

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

Diversification Opportunities for Associated Capital and Amazon

-0.64

Correlation Coefficient

Associated Capital  Amazon

Excellent diversification

The 5 months correlation between Associated and Amazon is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Associated Capital 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 Associated Capital Group 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 Associated Capital i.e., Associated Capital and Amazon go up and down completely randomly.

Pair Corralation between Associated Capital and Amazon

Allowing for the 90-day total investment horizon Associated Capital Group is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Associated Capital Group is 1.5 times less risky than Amazon. The stock trades about -0.01 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,773  in Amazon Inc on January 25, 2024 and sell it today you would earn a total of  2,886  from holding Amazon Inc or generate 19.54% return on investment over 90 days.

Time Period	5 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Associated Capital Group  vs.  Amazon Inc

Associated Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Amazon Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Associated Capital and Amazon

The main advantage of trading using opposite Associated Capital and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Capital 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 Associated Capital Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.