Correlation Between Amazon and China Vanke
Can any of the company-specific risk be diversified away by investing in both Amazon and China Vanke 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 China Vanke into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and China Vanke Co, you can compare the effects of market volatilities on Amazon and China Vanke 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 China Vanke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and China Vanke.
Diversification Opportunities for Amazon and China Vanke
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke 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 China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Amazon i.e., Amazon and China Vanke go up and down completely randomly.
Pair Corralation between Amazon and China Vanke
Given the investment horizon of 90 days Amazon is expected to generate 1.03 times less return on investment than China Vanke. But when comparing it to its historical volatility, Amazon Inc is 7.55 times less risky than China Vanke. It trades about 0.24 of its potential returns per unit of risk. China Vanke Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 33.00 in China Vanke Co on November 2, 2024 and sell it today you would lose (1.00) from holding China Vanke Co or give up 3.03% 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. China Vanke Co
Performance |
| Timeline |
| Amazon Inc |
| China Vanke |
Amazon and China Vanke Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and China Vanke
The main advantage of trading using opposite Amazon and China Vanke positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, China Vanke 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 China Vanke will offset losses from the drop in China Vanke's long position.The idea behind Amazon Inc and China Vanke Co 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.| China Vanke vs. Sino Land Co | China Vanke vs. Holiday Island Holdings | China Vanke vs. Daiwa House Industry | China Vanke vs. China Overseas Land |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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