Correlation Between Amazon and ENERGY ONE
Can any of the company-specific risk be diversified away by investing in both Amazon and ENERGY ONE 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 ENERGY ONE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and ENERGY ONE, you can compare the effects of market volatilities on Amazon and ENERGY ONE 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 ENERGY ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and ENERGY ONE.
Diversification Opportunities for Amazon and ENERGY ONE
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and ENERGY is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and ENERGY ONE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGY ONE 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 ENERGY ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGY ONE has no effect on the direction of Amazon i.e., Amazon and ENERGY ONE go up and down completely randomly.
Pair Corralation between Amazon and ENERGY ONE
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.6 times more return on investment than ENERGY ONE. However, Amazon Inc is 1.67 times less risky than ENERGY ONE. It trades about 0.12 of its potential returns per unit of risk. ENERGY ONE is currently generating about 0.03 per unit of risk. If you would invest 7,829 in Amazon Inc on September 16, 2024 and sell it today you would earn a total of 13,871 from holding Amazon Inc or generate 177.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. ENERGY ONE
Performance |
| Timeline |
| Amazon Inc |
| ENERGY ONE |
Amazon and ENERGY ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and ENERGY ONE
The main advantage of trading using opposite Amazon and ENERGY ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, ENERGY ONE 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 ENERGY ONE will offset losses from the drop in ENERGY ONE's long position.| Amazon vs. Altair Engineering | Amazon vs. Alaska Air Group | Amazon vs. Corsair Gaming | Amazon vs. Treasury Wine Estates |
| ENERGY ONE vs. Sims Metal Management | ENERGY ONE vs. CeoTronics AG | ENERGY ONE vs. Cleanaway Waste Management | ENERGY ONE vs. SLR Investment Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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