Correlation Between Amazon and Illumina
Can any of the company-specific risk be diversified away by investing in both Amazon and Illumina 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 Illumina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Illumina, you can compare the effects of market volatilities on Amazon and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Illumina.
Diversification Opportunities for Amazon and Illumina
Very poor diversification
The 3 months correlation between Amazon and Illumina is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Amazon i.e., Amazon and Illumina go up and down completely randomly.
Pair Corralation between Amazon and Illumina
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.9 times more return on investment than Illumina. However, Amazon Inc is 1.11 times less risky than Illumina. It trades about 0.11 of its potential returns per unit of risk. Illumina is currently generating about -0.01 per unit of risk. If you would invest 2,425 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 3,979 from holding Amazon Inc or generate 164.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.16% |
| Values | Daily Returns |
Amazon Inc vs. Illumina
Performance |
| Timeline |
| Amazon Inc |
| Illumina |
Amazon and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Illumina
The main advantage of trading using opposite Amazon and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.| Amazon vs. Bank of America | Amazon vs. Lloyds Banking Group | Amazon vs. SVB Financial Group | Amazon vs. Unifique Telecomunicaes SA |
| Illumina vs. Apartment Investment and | Illumina vs. HDFC Bank Limited | Illumina vs. Sumitomo Mitsui Financial | Illumina vs. MAHLE Metal Leve |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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