Correlation Between Amazon and Ameriprise Financial
Can any of the company-specific risk be diversified away by investing in both Amazon and Ameriprise Financial 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 Ameriprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Ameriprise Financial, you can compare the effects of market volatilities on Amazon and Ameriprise Financial 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 Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Ameriprise Financial.
Diversification Opportunities for Amazon and Ameriprise Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Ameriprise is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Amazon i.e., Amazon and Ameriprise Financial go up and down completely randomly.
Pair Corralation between Amazon and Ameriprise Financial
Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.4 times more return on investment than Ameriprise Financial. However, Amazon is 1.4 times more volatile than Ameriprise Financial. It trades about 0.1 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.06 per unit of risk. If you would invest 174,892 in Amazon Inc on August 27, 2024 and sell it today you would earn a total of 230,399 from holding Amazon Inc or generate 131.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Amazon Inc vs. Ameriprise Financial
Performance |
| Timeline |
| Amazon Inc |
| Ameriprise Financial |
Amazon and Ameriprise Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Ameriprise Financial
The main advantage of trading using opposite Amazon and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.The idea behind Amazon Inc and Ameriprise Financial 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.| Ameriprise Financial vs. The Select Sector | Ameriprise Financial vs. Promotora y Operadora | Ameriprise Financial vs. iShares Global Timber | Ameriprise Financial vs. SPDR Series Trust |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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