Correlation Between Amazon and Genworth Financial

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

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

Diversification Opportunities for Amazon and Genworth Financial

-0.19

Correlation Coefficient

Amazon  Genworth Financial

Good diversification

The 3 months correlation between Amazon and Genworth is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Genworth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genworth Financial 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 Genworth Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genworth Financial has no effect on the direction of Amazon i.e., Amazon and Genworth Financial go up and down completely randomly.

Pair Corralation between Amazon and Genworth Financial

Given the investment horizon of 90 days Amazon is expected to generate 1.11 times less return on investment than Genworth Financial. In addition to that, Amazon is 1.04 times more volatile than Genworth Financial. It trades about 0.05 of its total potential returns per unit of risk. Genworth Financial is currently generating about 0.06 per unit of volatility. If you would invest  360.00  in Genworth Financial on January 25, 2024 and sell it today you would earn a total of  240.00  from holding Genworth Financial or generate 66.67% return on investment over 90 days.

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

Amazon Inc  vs.  Genworth Financial

Amazon Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Genworth Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genworth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Genworth Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Amazon and Genworth Financial

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

The idea behind Amazon Inc and Genworth Financial 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.