Correlation Between Amazon and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both Amazon and Xtrackers FTSE 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 Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Xtrackers FTSE Developed, you can compare the effects of market volatilities on Amazon and Xtrackers FTSE 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 Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Xtrackers FTSE.
Diversification Opportunities for Amazon and Xtrackers FTSE
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and Xtrackers is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed 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 Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of Amazon i.e., Amazon and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between Amazon and Xtrackers FTSE
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.44 times more return on investment than Xtrackers FTSE. However, Amazon is 2.44 times more volatile than Xtrackers FTSE Developed. It trades about 0.1 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.06 per unit of risk. If you would invest 9,158 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 11,913 from holding Amazon Inc or generate 130.08% 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. Xtrackers FTSE Developed
Performance |
| Timeline |
| Amazon Inc |
| Xtrackers FTSE Developed |
Amazon and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Xtrackers FTSE
The main advantage of trading using opposite Amazon and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Xtrackers FTSE 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 Xtrackers FTSE will offset losses from the drop in Xtrackers FTSE's long position.The idea behind Amazon Inc and Xtrackers FTSE Developed 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.| Xtrackers FTSE vs. Xtrackers Russell Multifactor | Xtrackers FTSE vs. Xtrackers MSCI All | Xtrackers FTSE vs. WisdomTree Dynamic Currency | Xtrackers FTSE vs. Xtrackers MSCI Eurozone |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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