Correlation Between Amazon and ASOS PLC

Can any of the company-specific risk be diversified away by investing in both Amazon and ASOS PLC 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 ASOS PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and ASOS PLC, you can compare the effects of market volatilities on Amazon and ASOS PLC 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 ASOS PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and ASOS PLC.

Diversification Opportunities for Amazon and ASOS PLC

-0.33

Correlation Coefficient

Amazon  ASOS PLC

Very good diversification

The 3 months correlation between Amazon and ASOS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and ASOS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS PLC 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 ASOS PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS PLC has no effect on the direction of Amazon i.e., Amazon and ASOS PLC go up and down completely randomly.

Pair Corralation between Amazon and ASOS PLC

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.67 times more return on investment than ASOS PLC. However, Amazon Inc is 1.5 times less risky than ASOS PLC. It trades about 0.01 of its potential returns per unit of risk. ASOS PLC is currently generating about -0.2 per unit of risk. If you would invest  16,702  in Amazon Inc on January 30, 2024 and sell it today you would lose (18.00) from holding Amazon Inc or give up 0.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  ASOS PLC

Amazon Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

ASOS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASOS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Amazon and ASOS PLC

The main advantage of trading using opposite Amazon and ASOS PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, ASOS PLC 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 ASOS PLC will offset losses from the drop in ASOS PLC's long position.

The idea behind Amazon Inc and ASOS PLC 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.