Correlation Between Amazon and American Century
Can any of the company-specific risk be diversified away by investing in both Amazon and American Century 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 American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and American Century One, you can compare the effects of market volatilities on Amazon and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and American Century.
Diversification Opportunities for Amazon and American Century
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Amazon and American is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century One has no effect on the direction of Amazon i.e., Amazon and American Century go up and down completely randomly.
Pair Corralation between Amazon and American Century
Given the investment horizon of 90 days Amazon Inc is expected to generate 4.72 times more return on investment than American Century. However, Amazon is 4.72 times more volatile than American Century One. It trades about 0.1 of its potential returns per unit of risk. American Century One is currently generating about 0.13 per unit of risk. If you would invest 14,589 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 6,755 from holding Amazon Inc or generate 46.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. American Century One
Performance |
| Timeline |
| Amazon Inc |
| American Century One |
Amazon and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and American Century
The main advantage of trading using opposite Amazon and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.The idea behind Amazon Inc and American Century One 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.| American Century vs. Maryland Tax Free Bond | American Century vs. Calamos Dynamic Convertible | American Century vs. Versatile Bond Portfolio | American Century vs. The National Tax Free |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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