Correlation Between Amazon and Moderna
Can any of the company-specific risk be diversified away by investing in both Amazon and Moderna 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 Moderna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Moderna, you can compare the effects of market volatilities on Amazon and Moderna 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 Moderna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Moderna.
Diversification Opportunities for Amazon and Moderna
Pay attention - limited upside
The 3 months correlation between Amazon and Moderna is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Amazon i.e., Amazon and Moderna go up and down completely randomly.
Pair Corralation between Amazon and Moderna
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.43 times more return on investment than Moderna. However, Amazon Inc is 2.34 times less risky than Moderna. It trades about 0.28 of its potential returns per unit of risk. Moderna is currently generating about -0.15 per unit of risk. If you would invest 17,998 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 2,167 from holding Amazon Inc or generate 12.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Moderna
Performance |
| Timeline |
| Amazon Inc |
| Moderna |
Amazon and Moderna Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Moderna
The main advantage of trading using opposite Amazon and Moderna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Moderna 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 Moderna will offset losses from the drop in Moderna's long position.| Amazon vs. Amazon Inc | Amazon vs. Alibaba Group Holdings | Amazon vs. JD Inc | Amazon vs. Superior Plus Corp |
| Moderna vs. Mercedes Benz Group AG | Moderna vs. BioNTech SE | Moderna vs. Superior Plus Corp | Moderna vs. NMI Holdings |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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