Correlation Between Amazon and Loma Negra
Can any of the company-specific risk be diversified away by investing in both Amazon and Loma Negra 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 Loma Negra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Loma Negra Compania, you can compare the effects of market volatilities on Amazon and Loma Negra 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 Loma Negra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Loma Negra.
Diversification Opportunities for Amazon and Loma Negra
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Loma is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Loma Negra Compania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loma Negra Compania 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 Loma Negra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loma Negra Compania has no effect on the direction of Amazon i.e., Amazon and Loma Negra go up and down completely randomly.
Pair Corralation between Amazon and Loma Negra
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.45 times more return on investment than Loma Negra. However, Amazon Inc is 2.22 times less risky than Loma Negra. It trades about 0.16 of its potential returns per unit of risk. Loma Negra Compania is currently generating about -0.1 per unit of risk. If you would invest 179,500 in Amazon Inc on October 20, 2024 and sell it today you would earn a total of 8,000 from holding Amazon Inc or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Loma Negra Compania
Performance |
| Timeline |
| Amazon Inc |
| Loma Negra Compania |
Amazon and Loma Negra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Loma Negra
The main advantage of trading using opposite Amazon and Loma Negra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Loma Negra 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 Loma Negra will offset losses from the drop in Loma Negra's long position.| Amazon vs. Compania de Transporte | Amazon vs. Telecom Argentina | Amazon vs. Harmony Gold Mining | Amazon vs. Transportadora de Gas |
| Loma Negra vs. Harmony Gold Mining | Loma Negra vs. Transportadora de Gas | Loma Negra vs. Compania de Transporte | Loma Negra vs. Telecom Argentina |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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