Correlation Between Blue Bird and Amazon

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Can any of the company-specific risk be diversified away by investing in both Blue Bird 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 Blue Bird and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Bird Corp and Amazon Inc, you can compare the effects of market volatilities on Blue Bird 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 Blue Bird with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Bird and Amazon.

Diversification Opportunities for Blue Bird and Amazon

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Blue and Amazon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Blue Bird 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 Blue Bird Corp 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 Blue Bird i.e., Blue Bird and Amazon go up and down completely randomly.

Pair Corralation between Blue Bird and Amazon

Given the investment horizon of 90 days Blue Bird Corp is expected to generate 1.79 times more return on investment than Amazon. However, Blue Bird is 1.79 times more volatile than Amazon Inc. It trades about 0.34 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.16 per unit of risk. If you would invest  3,267  in Blue Bird Corp on December 30, 2023 and sell it today you would earn a total of  567.00  from holding Blue Bird Corp or generate 17.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Blue Bird Corp  vs.  Amazon Inc

 Performance 
       Timeline  
Blue Bird Corp 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Blue Bird Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Blue Bird exhibited solid returns over the last few months and may actually be approaching a breakup point.
Amazon Inc 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Blue Bird and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Blue Bird and Amazon

The main advantage of trading using opposite Blue Bird and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Bird 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.
The idea behind Blue Bird Corp and Amazon Inc 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.
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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