Correlation Between Amazon and Mogu Inc

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

Diversification Opportunities for Amazon and Mogu Inc

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Amazon and Mogu Inc is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Mogu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mogu Inc ADR 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 Mogu Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mogu Inc ADR has no effect on the direction of Amazon i.e., Amazon and Mogu Inc go up and down completely randomly.

Pair Corralation between Amazon and Mogu Inc

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.56 times more return on investment than Mogu Inc. However, Amazon Inc is 1.77 times less risky than Mogu Inc. It trades about 0.34 of its potential returns per unit of risk. Mogu Inc ADR is currently generating about 0.02 per unit of risk. If you would invest  11,376  in Amazon Inc on May 17, 2022 and sell it today you would earn a total of  2,942  from holding Amazon Inc or generate 25.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Mogu Inc ADR

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
9 of 100
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. Despite quite weak basic indicators, Amazon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Amazon Price Channel

Mogu Inc ADR 
Mogu Inc Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mogu Inc ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Mogu Inc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mogu Inc Price Channel

Amazon and Mogu Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Mogu Inc

The main advantage of trading using opposite Amazon and Mogu Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Mogu Inc 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 Mogu Inc will offset losses from the drop in Mogu Inc's long position.
The idea behind Amazon Inc and Mogu Inc ADR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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