Correlation Between Amazon and Dreyfus Natural
Can any of the company-specific risk be diversified away by investing in both Amazon and Dreyfus Natural 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 Dreyfus Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Dreyfus Natural Resources, you can compare the effects of market volatilities on Amazon and Dreyfus Natural 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 Dreyfus Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Dreyfus Natural.
Diversification Opportunities for Amazon and Dreyfus Natural
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Amazon and Dreyfus is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Dreyfus Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Natural Resources 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 Dreyfus Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Natural Resources has no effect on the direction of Amazon i.e., Amazon and Dreyfus Natural go up and down completely randomly.
Pair Corralation between Amazon and Dreyfus Natural
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.48 times more return on investment than Dreyfus Natural. However, Amazon is 1.48 times more volatile than Dreyfus Natural Resources. It trades about 0.09 of its potential returns per unit of risk. Dreyfus Natural Resources is currently generating about 0.06 per unit of risk. If you would invest 14,742 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 6,047 from holding Amazon Inc or generate 41.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Dreyfus Natural Resources
Performance |
| Timeline |
| Amazon Inc |
| Dreyfus Natural Resources |
Amazon and Dreyfus Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Dreyfus Natural
The main advantage of trading using opposite Amazon and Dreyfus Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Dreyfus Natural 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 Dreyfus Natural will offset losses from the drop in Dreyfus Natural's long position.The idea behind Amazon Inc and Dreyfus Natural Resources 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.| Dreyfus Natural vs. Dreyfus Global Equity | Dreyfus Natural vs. Dreyfus Institutional Reserves | Dreyfus Natural vs. Dynamic Total Return | Dreyfus Natural vs. Dynamic Total Return |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |