Correlation Between Amazon and Astellas Pharma
Can any of the company-specific risk be diversified away by investing in both Amazon and Astellas Pharma 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 Astellas Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Astellas Pharma, you can compare the effects of market volatilities on Amazon and Astellas Pharma 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 Astellas Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Astellas Pharma.
Diversification Opportunities for Amazon and Astellas Pharma
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and Astellas is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma 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 Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of Amazon i.e., Amazon and Astellas Pharma go up and down completely randomly.
Pair Corralation between Amazon and Astellas Pharma
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.06 times more return on investment than Astellas Pharma. However, Amazon is 1.06 times more volatile than Astellas Pharma. It trades about 0.05 of its potential returns per unit of risk. Astellas Pharma is currently generating about 0.02 per unit of risk. If you would invest 18,215 in Amazon Inc on August 24, 2024 and sell it today you would earn a total of 1,623 from holding Amazon Inc or generate 8.91% 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. Astellas Pharma
Performance |
| Timeline |
| Amazon Inc |
| Astellas Pharma |
Amazon and Astellas Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Astellas Pharma
The main advantage of trading using opposite Amazon and Astellas Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Astellas Pharma 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 Astellas Pharma will offset losses from the drop in Astellas Pharma's long position.The idea behind Amazon Inc and Astellas Pharma 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.| Astellas Pharma vs. Bristol Myers Squibb | Astellas Pharma vs. Bayer AG | Astellas Pharma vs. Daiichi Sankyo | Astellas Pharma vs. AstraZeneca PLC |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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