Correlation Between International Consolidated and Amazon
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Amazon Inc, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Amazon.
Diversification Opportunities for International Consolidated and Amazon
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Amazon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Amazon go up and down completely randomly.
Pair Corralation between International Consolidated and Amazon
Assuming the 90 days trading horizon International Consolidated is expected to generate 1.26 times less return on investment than Amazon. But when comparing it to its historical volatility, International Consolidated Airlines is 1.3 times less risky than Amazon. It trades about 0.08 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,900 in Amazon Inc on October 30, 2024 and sell it today you would earn a total of 12,100 from holding Amazon Inc or generate 122.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
International Consolidated Air vs. Amazon Inc
Performance |
| Timeline |
| International Consolidated |
| Amazon Inc |
International Consolidated and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Amazon
The main advantage of trading using opposite International Consolidated and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.| International Consolidated vs. Made Tech Group | International Consolidated vs. Europa Metals | International Consolidated vs. Micron Technology | International Consolidated vs. Aptitude Software Group |
| Amazon vs. Indutrade AB | Amazon vs. Pets at Home | Amazon vs. Cairn Homes PLC | Amazon vs. Seche Environnement SA |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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