Correlation Between Amazon and Generative
Can any of the company-specific risk be diversified away by investing in both Amazon and Generative 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 Generative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Generative AI Solutions, you can compare the effects of market volatilities on Amazon and Generative 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 Generative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Generative.
Diversification Opportunities for Amazon and Generative
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Generative is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Generative AI Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generative AI Solutions 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 Generative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generative AI Solutions has no effect on the direction of Amazon i.e., Amazon and Generative go up and down completely randomly.
Pair Corralation between Amazon and Generative
Given the investment horizon of 90 days Amazon is expected to generate 4.53 times less return on investment than Generative. But when comparing it to its historical volatility, Amazon Inc is 10.09 times less risky than Generative. It trades about 0.18 of its potential returns per unit of risk. Generative AI Solutions is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Generative AI Solutions on September 14, 2024 and sell it today you would lose (0.20) from holding Generative AI Solutions or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Generative AI Solutions
Performance |
| Timeline |
| Amazon Inc |
| Generative AI Solutions |
Amazon and Generative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Generative
The main advantage of trading using opposite Amazon and Generative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Generative 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 Generative will offset losses from the drop in Generative's long position.The idea behind Amazon Inc and Generative AI Solutions 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.| Generative vs. Ironveld Plc | Generative vs. Summit Environmental | Generative vs. Tianjin Capital Environmental | Generative vs. Red Branch Technologies |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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