Correlation Between Amazon and One Choice
Can any of the company-specific risk be diversified away by investing in both Amazon and One Choice 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 One Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and One Choice 2055, you can compare the effects of market volatilities on Amazon and One Choice 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 One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and One Choice.
Diversification Opportunities for Amazon and One Choice
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and One is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and One Choice 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice 2055 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 One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice 2055 has no effect on the direction of Amazon i.e., Amazon and One Choice go up and down completely randomly.
Pair Corralation between Amazon and One Choice
Given the investment horizon of 90 days Amazon Inc is expected to generate 3.53 times more return on investment than One Choice. However, Amazon is 3.53 times more volatile than One Choice 2055. It trades about 0.18 of its potential returns per unit of risk. One Choice 2055 is currently generating about 0.12 per unit of risk. If you would invest 18,700 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 3,804 from holding Amazon Inc or generate 20.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Amazon Inc vs. One Choice 2055
Performance |
| Timeline |
| Amazon Inc |
| One Choice 2055 |
Amazon and One Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and One Choice
The main advantage of trading using opposite Amazon and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, One Choice 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 One Choice will offset losses from the drop in One Choice's long position.The idea behind Amazon Inc and One Choice 2055 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.| One Choice vs. One Choice 2050 | One Choice vs. One Choice 2040 | One Choice vs. One Choice 2045 | One Choice vs. One Choice 2030 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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