Correlation Between Amazon and Biloxi Marsh
Can any of the company-specific risk be diversified away by investing in both Amazon and Biloxi Marsh 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 Biloxi Marsh into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Biloxi Marsh Lands, you can compare the effects of market volatilities on Amazon and Biloxi Marsh 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 Biloxi Marsh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Biloxi Marsh.
Diversification Opportunities for Amazon and Biloxi Marsh
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and Biloxi is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Biloxi Marsh Lands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biloxi Marsh Lands 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 Biloxi Marsh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biloxi Marsh Lands has no effect on the direction of Amazon i.e., Amazon and Biloxi Marsh go up and down completely randomly.
Pair Corralation between Amazon and Biloxi Marsh
Given the investment horizon of 90 days Amazon Inc is expected to generate 45.38 times more return on investment than Biloxi Marsh. However, Amazon is 45.38 times more volatile than Biloxi Marsh Lands. It trades about 0.07 of its potential returns per unit of risk. Biloxi Marsh Lands is currently generating about -0.09 per unit of risk. If you would invest 17,834 in Amazon Inc on September 1, 2024 and sell it today you would earn a total of 2,955 from holding Amazon Inc or generate 16.57% 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. Biloxi Marsh Lands
Performance |
| Timeline |
| Amazon Inc |
| Biloxi Marsh Lands |
Amazon and Biloxi Marsh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Biloxi Marsh
The main advantage of trading using opposite Amazon and Biloxi Marsh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Biloxi Marsh 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 Biloxi Marsh will offset losses from the drop in Biloxi Marsh's long position.The idea behind Amazon Inc and Biloxi Marsh Lands 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.| Biloxi Marsh vs. Horizon Oil Limited | Biloxi Marsh vs. Gulf Keystone Petroleum | Biloxi Marsh vs. Cross Timbers Royalty | Biloxi Marsh vs. San Juan Basin |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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