Correlation Between Amazon and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both Amazon and Shoprite Holdings 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 Shoprite Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Shoprite Holdings Ltd, you can compare the effects of market volatilities on Amazon and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Shoprite Holdings.
Diversification Opportunities for Amazon and Shoprite Holdings
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Amazon and Shoprite is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Shoprite Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Amazon i.e., Amazon and Shoprite Holdings go up and down completely randomly.
Pair Corralation between Amazon and Shoprite Holdings
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.07 times more return on investment than Shoprite Holdings. However, Amazon is 1.07 times more volatile than Shoprite Holdings Ltd. It trades about 0.17 of its potential returns per unit of risk. Shoprite Holdings Ltd is currently generating about -0.04 per unit of risk. If you would invest 18,196 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 2,593 from holding Amazon Inc or generate 14.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Shoprite Holdings Ltd
Performance |
| Timeline |
| Amazon Inc |
| Shoprite Holdings |
Amazon and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Shoprite Holdings
The main advantage of trading using opposite Amazon and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Shoprite Holdings 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 Shoprite Holdings will offset losses from the drop in Shoprite Holdings' long position.The idea behind Amazon Inc and Shoprite Holdings Ltd 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.| Shoprite Holdings vs. Sanlam Ltd PK | Shoprite Holdings vs. Vodacom Group Ltd | Shoprite Holdings vs. Woolworths Holdings Ltd | Shoprite Holdings vs. Standard Bank Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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