Correlation Between Chubb and Amazon

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

Diversification Opportunities for Chubb and Amazon

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Chubb and Amazon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Chubb 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 Chubb 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 Chubb i.e., Chubb and Amazon go up and down completely randomly.

Pair Corralation between Chubb and Amazon

Allowing for the 90-day total investment horizon Chubb is expected to generate 2.05 times less return on investment than Amazon. But when comparing it to its historical volatility, Chubb is 1.54 times less risky than Amazon. It trades about 0.1 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  17,354  in Amazon Inc on December 29, 2023 and sell it today you would earn a total of  629.00  from holding Amazon Inc or generate 3.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Chubb  vs.  Amazon Inc

 Performance 
       Timeline  
Chubb 

Risk-Adjusted Performance

23 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Chubb sustained solid returns over the last few months and may actually be approaching a breakup point.
Amazon Inc 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Chubb and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chubb and Amazon

The main advantage of trading using opposite Chubb and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb 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 Chubb 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.
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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