Correlation Between Adams Resources and Amazon

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

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

Diversification Opportunities for Adams Resources and Amazon

0.74

Correlation Coefficient

Adams Resources  Amazon

Poor diversification

The 3 months correlation between Adams and Amazon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Adams Resources 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 Adams Resources Energy 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 Adams Resources i.e., Adams Resources and Amazon go up and down completely randomly.

Pair Corralation between Adams Resources and Amazon

Allowing for the 90-day total investment horizon Adams Resources Energy is expected to under-perform the Amazon. In addition to that, Adams Resources is 1.09 times more volatile than Amazon Inc. It trades about 0.0 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.04 per unit of volatility. If you would invest  12,450  in Amazon Inc on January 20, 2024 and sell it today you would earn a total of  5,013  from holding Amazon Inc or generate 40.27% return on investment over 90 days.

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

Adams Resources Energy  vs.  Amazon Inc

Adams Resources Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Resources Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Adams Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adams Resources and Amazon

The main advantage of trading using opposite Adams Resources and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources 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 Adams Resources Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.