Correlation Between Amazon and Agora SA
Can any of the company-specific risk be diversified away by investing in both Amazon and Agora SA 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 Agora SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Agora SA, you can compare the effects of market volatilities on Amazon and Agora SA 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 Agora SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Agora SA.
Diversification Opportunities for Amazon and Agora SA
Excellent diversification
The 3 months correlation between Amazon and Agora is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Agora SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agora SA 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 Agora SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agora SA has no effect on the direction of Amazon i.e., Amazon and Agora SA go up and down completely randomly.
Pair Corralation between Amazon and Agora SA
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.9 times more return on investment than Agora SA. However, Amazon Inc is 1.11 times less risky than Agora SA. It trades about 0.09 of its potential returns per unit of risk. Agora SA is currently generating about 0.07 per unit of risk. If you would invest 9,249 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 11,540 from holding Amazon Inc or generate 124.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Agora SA
Performance |
| Timeline |
| Amazon Inc |
| Agora SA |
Amazon and Agora SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Agora SA
The main advantage of trading using opposite Amazon and Agora SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Agora SA 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 Agora SA will offset losses from the drop in Agora SA's long position.The idea behind Amazon Inc and Agora SA 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.| Agora SA vs. Banco Santander SA | Agora SA vs. UniCredit SpA | Agora SA vs. CEZ as | Agora SA vs. Polski Koncern Naftowy |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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