Correlation Between Amazon and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Amazon and Mid Cap 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 Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Mid Cap Value, you can compare the effects of market volatilities on Amazon and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Mid Cap.
Diversification Opportunities for Amazon and Mid Cap
Poor diversification
The 3 months correlation between Amazon and Mid is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Amazon i.e., Amazon and Mid Cap go up and down completely randomly.
Pair Corralation between Amazon and Mid Cap
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.54 times more return on investment than Mid Cap. However, Amazon is 2.54 times more volatile than Mid Cap Value. It trades about 0.08 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.07 per unit of risk. If you would invest 12,657 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 8,132 from holding Amazon Inc or generate 64.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Mid Cap Value
Performance |
| Timeline |
| Amazon Inc |
| Mid Cap Value |
Amazon and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Mid Cap
The main advantage of trading using opposite Amazon and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.The idea behind Amazon Inc and Mid Cap Value 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.| Mid Cap vs. Nuveen Small Cap | Mid Cap vs. Ultramid Cap Profund Ultramid Cap | Mid Cap vs. Blackrock Mid Cap |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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