Correlation Between Amazon and Banco Comercial
Can any of the company-specific risk be diversified away by investing in both Amazon and Banco Comercial 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 Banco Comercial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Banco Comercial Portugues, you can compare the effects of market volatilities on Amazon and Banco Comercial 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 Banco Comercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Banco Comercial.
Diversification Opportunities for Amazon and Banco Comercial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Banco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Banco Comercial Portugues in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Comercial Portugues 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 Banco Comercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Comercial Portugues has no effect on the direction of Amazon i.e., Amazon and Banco Comercial go up and down completely randomly.
Pair Corralation between Amazon and Banco Comercial
Given the investment horizon of 90 days Amazon is expected to generate 1.61 times less return on investment than Banco Comercial. But when comparing it to its historical volatility, Amazon Inc is 1.14 times less risky than Banco Comercial. It trades about 0.07 of its potential returns per unit of risk. Banco Comercial Portugues is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Banco Comercial Portugues on September 5, 2024 and sell it today you would earn a total of 10.00 from holding Banco Comercial Portugues or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.9% |
| Values | Daily Returns |
Amazon Inc vs. Banco Comercial Portugues
Performance |
| Timeline |
| Amazon Inc |
| Banco Comercial Portugues |
Amazon and Banco Comercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Banco Comercial
The main advantage of trading using opposite Amazon and Banco Comercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Banco Comercial 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 Banco Comercial will offset losses from the drop in Banco Comercial's long position.The idea behind Amazon Inc and Banco Comercial Portugues 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.| Banco Comercial vs. Sonae SGPS SA | Banco Comercial vs. Galp Energia SGPS | Banco Comercial vs. EDP Energias | Banco Comercial vs. CTT Correios de |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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