Correlation Between Apple and Amazon
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Amazon Inc, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Amazon.
Diversification Opportunities for Apple and Amazon
Very weak diversification
The 3 months correlation between Apple and Amazon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Apple 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 Apple Inc 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 Apple i.e., Apple and Amazon go up and down completely randomly.
Pair Corralation between Apple and Amazon
Assuming the 90 days trading horizon Apple is expected to generate 1.69 times less return on investment than Amazon. But when comparing it to its historical volatility, Apple Inc is 1.25 times less risky than Amazon. It trades about 0.07 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8,690 in Amazon Inc on August 24, 2024 and sell it today you would earn a total of 10,266 from holding Amazon Inc or generate 118.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Amazon Inc
Performance |
| Timeline |
| Apple Inc |
| Amazon Inc |
Apple and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Amazon
The main advantage of trading using opposite Apple and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Fukuyama Transporting Co | Apple vs. CODERE ONLINE LUX | Apple vs. MUTUIONLINE | Apple vs. SALESFORCE INC CDR |
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 CEOs Directory module to screen CEOs from public companies around the world.
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