Correlation Between Amazon and Alfen NV
Can any of the company-specific risk be diversified away by investing in both Amazon and Alfen NV 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 Alfen NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Alfen NV, you can compare the effects of market volatilities on Amazon and Alfen NV 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 Alfen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Alfen NV.
Diversification Opportunities for Amazon and Alfen NV
Excellent diversification
The 3 months correlation between Amazon and Alfen is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of Amazon i.e., Amazon and Alfen NV go up and down completely randomly.
Pair Corralation between Amazon and Alfen NV
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.54 times more return on investment than Alfen NV. However, Amazon Inc is 1.86 times less risky than Alfen NV. It trades about 0.08 of its potential returns per unit of risk. Alfen NV is currently generating about -0.14 per unit of risk. If you would invest 12,530 in Amazon Inc on August 27, 2024 and sell it today you would earn a total of 7,182 from holding Amazon Inc or generate 57.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Alfen NV
Performance |
| Timeline |
| Amazon Inc |
| Alfen NV |
Amazon and Alfen NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Alfen NV
The main advantage of trading using opposite Amazon and Alfen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Alfen NV 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 Alfen NV will offset losses from the drop in Alfen NV's long position.The idea behind Amazon Inc and Alfen NV 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.| Alfen NV vs. Copa Holdings SA | Alfen NV vs. United Airlines Holdings | Alfen NV vs. Delta Air Lines | Alfen NV vs. SkyWest |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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