Correlation Between Amazon and Waste Management
Can any of the company-specific risk be diversified away by investing in both Amazon and Waste Management 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 Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Waste Management, you can compare the effects of market volatilities on Amazon and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Waste Management.
Diversification Opportunities for Amazon and Waste Management
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Amazon and Waste is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Amazon i.e., Amazon and Waste Management go up and down completely randomly.
Pair Corralation between Amazon and Waste Management
Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.63 times more return on investment than Waste Management. However, Amazon is 1.63 times more volatile than Waste Management. It trades about 0.1 of its potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of risk. If you would invest 8,750 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 10,790 from holding Amazon Inc or generate 123.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Waste Management
Performance |
| Timeline |
| Amazon Inc |
| Waste Management |
Amazon and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Waste Management
The main advantage of trading using opposite Amazon and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| Amazon vs. GFL ENVIRONM | Amazon vs. Reliance Steel Aluminum | Amazon vs. Boiron SA | Amazon vs. NIPPON STEEL SPADR |
| Waste Management vs. TOTAL GABON | Waste Management vs. Walgreens Boots Alliance | Waste Management vs. Peak Resources Limited |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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