Correlation Between Amazon and WESTERN DIGITAL
Can any of the company-specific risk be diversified away by investing in both Amazon and WESTERN DIGITAL 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 WESTERN DIGITAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and WESTERN DIGITAL, you can compare the effects of market volatilities on Amazon and WESTERN DIGITAL 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 WESTERN DIGITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and WESTERN DIGITAL.
Diversification Opportunities for Amazon and WESTERN DIGITAL
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and WESTERN is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL 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 WESTERN DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN DIGITAL has no effect on the direction of Amazon i.e., Amazon and WESTERN DIGITAL go up and down completely randomly.
Pair Corralation between Amazon and WESTERN DIGITAL
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.82 times more return on investment than WESTERN DIGITAL. However, Amazon Inc is 1.22 times less risky than WESTERN DIGITAL. It trades about 0.21 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.17 per unit of risk. If you would invest 17,898 in Amazon Inc on August 31, 2024 and sell it today you would earn a total of 1,802 from holding Amazon Inc or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Amazon Inc vs. WESTERN DIGITAL
Performance |
| Timeline |
| Amazon Inc |
| WESTERN DIGITAL |
Amazon and WESTERN DIGITAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and WESTERN DIGITAL
The main advantage of trading using opposite Amazon and WESTERN DIGITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, WESTERN DIGITAL 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 WESTERN DIGITAL will offset losses from the drop in WESTERN DIGITAL's long position.| Amazon vs. REVO INSURANCE SPA | Amazon vs. United Insurance Holdings | Amazon vs. Ping An Insurance | Amazon vs. Direct Line Insurance |
| WESTERN DIGITAL vs. PRECISION DRILLING P | WESTERN DIGITAL vs. Zijin Mining Group | WESTERN DIGITAL vs. MCEWEN MINING INC | WESTERN DIGITAL vs. ON SEMICONDUCTOR |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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