Correlation Between Amazon and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Amazon and Beazer Homes 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 Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Beazer Homes USA, you can compare the effects of market volatilities on Amazon and Beazer Homes 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 Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Beazer Homes.
Diversification Opportunities for Amazon and Beazer Homes
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Beazer is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA 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 Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of Amazon i.e., Amazon and Beazer Homes go up and down completely randomly.
Pair Corralation between Amazon and Beazer Homes
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.56 times more return on investment than Beazer Homes. However, Amazon Inc is 1.8 times less risky than Beazer Homes. It trades about 0.08 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.03 per unit of risk. If you would invest 11,934 in Amazon Inc on August 28, 2024 and sell it today you would earn a total of 7,164 from holding Amazon Inc or generate 60.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Amazon Inc vs. Beazer Homes USA
Performance |
| Timeline |
| Amazon Inc |
| Beazer Homes USA |
Amazon and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Beazer Homes
The main advantage of trading using opposite Amazon and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Beazer Homes 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 Beazer Homes will offset losses from the drop in Beazer Homes' long position.The idea behind Amazon Inc and Beazer Homes USA 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.| Beazer Homes vs. GALENA MINING LTD | Beazer Homes vs. Nippon Steel | Beazer Homes vs. Perseus Mining Limited | Beazer Homes vs. PRECISION DRILLING P |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |