Correlation Between Amazon and Timothy Small-cap

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

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

Diversification Opportunities for Amazon and Timothy Small-cap

0.55

Correlation Coefficient

Amazon  Timothy Small-cap

Very weak diversification

The 3 months correlation between Amazon and Timothy is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Timothy Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Small Cap 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 Timothy Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Small Cap has no effect on the direction of Amazon i.e., Amazon and Timothy Small-cap go up and down completely randomly.

Pair Corralation between Amazon and Timothy Small-cap

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.63 times more return on investment than Timothy Small-cap. However, Amazon is 1.63 times more volatile than Timothy Small Cap Value. It trades about 0.0 of its potential returns per unit of risk. Timothy Small Cap Value is currently generating about -0.03 per unit of risk. If you would invest  22,319  in Amazon Inc on July 16, 2025 and sell it today you would lose (312.00) from holding Amazon Inc or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Amazon Inc  vs.  Timothy Small Cap Value

Amazon Inc

Risk-Adjusted Performance

Weakest

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Timothy Small Cap

Risk-Adjusted Performance

Weakest

Over the last 90 days Timothy Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Timothy Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and Timothy Small-cap

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

The idea behind Amazon Inc and Timothy Small Cap Value 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.