Correlation Between Amazon and Farfetch
Can any of the company-specific risk be diversified away by investing in both Amazon and Farfetch 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 Farfetch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Farfetch Ltd Class, you can compare the effects of market volatilities on Amazon and Farfetch 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 Farfetch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Farfetch.
Diversification Opportunities for Amazon and Farfetch
Poor diversification
The 3 months correlation between Amazon and Farfetch is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Farfetch Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Class 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 Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Class has no effect on the direction of Amazon i.e., Amazon and Farfetch go up and down completely randomly.
Pair Corralation between Amazon and Farfetch
If you would invest 17,625 in Amazon Inc on November 2, 2024 and sell it today you would earn a total of 5,839 from holding Amazon Inc or generate 33.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.97% |
| Values | Daily Returns |
Amazon Inc vs. Farfetch Ltd Class
Performance |
| Timeline |
| Amazon Inc |
| Farfetch Class |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and Farfetch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Farfetch
The main advantage of trading using opposite Amazon and Farfetch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Farfetch 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 Farfetch will offset losses from the drop in Farfetch's long position.The idea behind Amazon Inc and Farfetch Ltd Class 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.| Farfetch vs. JD Inc Adr | Farfetch vs. Alibaba Group Holding | Farfetch vs. Sea | Farfetch vs. Vipshop Holdings Limited |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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