Correlation Between Roche Holding and Amazon

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

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

Diversification Opportunities for Roche Holding and Amazon

-0.73

Correlation Coefficient

Roche Holding  Amazon

Pay attention - limited upside

The 3 months correlation between Roche and Amazon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Roche Holding 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 Roche Holding AG 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 Roche Holding i.e., Roche Holding and Amazon go up and down completely randomly.

Pair Corralation between Roche Holding and Amazon

Assuming the 90 days horizon Roche Holding AG is expected to under-perform the Amazon. In addition to that, Roche Holding is 1.8 times more volatile than Amazon Inc. It trades about -0.01 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.13 per unit of volatility. If you would invest  10,205  in Amazon Inc on January 26, 2024 and sell it today you would earn a total of  7,454  from holding Amazon Inc or generate 73.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Roche Holding AG  vs.  Amazon Inc

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Roche Holding is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Amazon Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Roche Holding and Amazon

The main advantage of trading using opposite Roche Holding and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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 Roche Holding AG 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.