Correlation Between Amazon and Cerner Corp

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Can any of the company-specific risk be diversified away by investing in both Amazon and Cerner Corp 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 Cerner Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Cerner Corp, you can compare the effects of market volatilities on Amazon and Cerner Corp 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 Cerner Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Cerner Corp.

Diversification Opportunities for Amazon and Cerner Corp

  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Amazon and Cerner is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Cerner Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerner Corp 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 Cerner Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerner Corp has no effect on the direction of Amazon i.e., Amazon and Cerner Corp go up and down completely randomly.

Pair Corralation between Amazon and Cerner Corp

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Cerner Corp. In addition to that, Amazon is 2.43 times more volatile than Cerner Corp. It trades about -0.07 of its total potential returns per unit of risk. Cerner Corp is currently generating about 0.15 per unit of volatility. If you would invest  7,348  in Cerner Corp on September 11, 2022 and sell it today you would earn a total of  2,144  from holding Cerner Corp or generate 29.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Amazon Inc  vs.  Cerner Corp

 Performance (%) 
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Cerner Corp 
Cerner Performance
0 of 100
Over the last 90 days Cerner Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cerner Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Amazon and Cerner Corp Volatility Contrast

   Predicted Return Density   

Pair Trading with Amazon and Cerner Corp

The main advantage of trading using opposite Amazon and Cerner Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Cerner Corp 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 Cerner Corp will offset losses from the drop in Cerner Corp's long position.
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The idea behind Amazon Inc and Cerner Corp 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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