Correlation Between Amazon and GEAR4MUSIC
Can any of the company-specific risk be diversified away by investing in both Amazon and GEAR4MUSIC 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 GEAR4MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and GEAR4MUSIC LS 10, you can compare the effects of market volatilities on Amazon and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and GEAR4MUSIC.
Diversification Opportunities for Amazon and GEAR4MUSIC
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Amazon and GEAR4MUSIC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of Amazon i.e., Amazon and GEAR4MUSIC go up and down completely randomly.
Pair Corralation between Amazon and GEAR4MUSIC
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.43 times more return on investment than GEAR4MUSIC. However, Amazon Inc is 2.35 times less risky than GEAR4MUSIC. It trades about 0.18 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about -0.08 per unit of risk. If you would invest 21,755 in Amazon Inc on November 4, 2024 and sell it today you would earn a total of 1,260 from holding Amazon Inc or generate 5.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amazon Inc vs. GEAR4MUSIC LS 10
Performance |
| Timeline |
| Amazon Inc |
| GEAR4MUSIC LS 10 |
Amazon and GEAR4MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and GEAR4MUSIC
The main advantage of trading using opposite Amazon and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.| Amazon vs. New Residential Investment | Amazon vs. ECHO INVESTMENT ZY | Amazon vs. HOCHSCHILD MINING | Amazon vs. Boyd Gaming |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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