Correlation Between Foot Locker and Amazon
Can any of the company-specific risk be diversified away by investing in both Foot Locker 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 Foot Locker and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Amazon Inc, you can compare the effects of market volatilities on Foot Locker 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 Foot Locker with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Amazon.
Diversification Opportunities for Foot Locker and Amazon
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Foot and Amazon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Foot Locker 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 Foot Locker 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 Foot Locker i.e., Foot Locker and Amazon go up and down completely randomly.
Pair Corralation between Foot Locker and Amazon
Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Foot Locker is 1.11 times less risky than Amazon. The stock trades about -0.11 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 18,471 in Amazon Inc on August 24, 2024 and sell it today you would earn a total of 1,367 from holding Amazon Inc or generate 7.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foot Locker vs. Amazon Inc
Performance |
| Timeline |
| Foot Locker |
| Amazon Inc |
Foot Locker and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Amazon
The main advantage of trading using opposite Foot Locker and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place | Foot Locker vs. American Eagle Outfitters |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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