Correlation Between Amazon and Lennar
Can any of the company-specific risk be diversified away by investing in both Amazon and Lennar 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 Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Lennar, you can compare the effects of market volatilities on Amazon and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Lennar.
Diversification Opportunities for Amazon and Lennar
Very good diversification
The 3 months correlation between Amazon and Lennar is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Amazon i.e., Amazon and Lennar go up and down completely randomly.
Pair Corralation between Amazon and Lennar
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.96 times more return on investment than Lennar. However, Amazon Inc is 1.04 times less risky than Lennar. It trades about 0.09 of its potential returns per unit of risk. Lennar is currently generating about 0.08 per unit of risk. If you would invest 11,586 in Amazon Inc on August 31, 2024 and sell it today you would earn a total of 7,960 from holding Amazon Inc or generate 68.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Lennar
Performance |
| Timeline |
| Amazon Inc |
| Lennar |
Amazon and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Lennar
The main advantage of trading using opposite Amazon and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| Amazon vs. Scientific Games | Amazon vs. FUTURE GAMING GRP | Amazon vs. Grupo Carso SAB | Amazon vs. GEELY AUTOMOBILE |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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