Correlation Between Amazon and Highlands Bankshares
Can any of the company-specific risk be diversified away by investing in both Amazon and Highlands Bankshares 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 Highlands Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Highlands Bankshares, you can compare the effects of market volatilities on Amazon and Highlands Bankshares 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 Highlands Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Highlands Bankshares.
Diversification Opportunities for Amazon and Highlands Bankshares
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Highlands is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Highlands Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlands Bankshares 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 Highlands Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlands Bankshares has no effect on the direction of Amazon i.e., Amazon and Highlands Bankshares go up and down completely randomly.
Pair Corralation between Amazon and Highlands Bankshares
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.51 times more return on investment than Highlands Bankshares. However, Amazon is 2.51 times more volatile than Highlands Bankshares. It trades about 0.16 of its potential returns per unit of risk. Highlands Bankshares is currently generating about 0.36 per unit of risk. If you would invest 19,578 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 1,211 from holding Amazon Inc or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Highlands Bankshares
Performance |
| Timeline |
| Amazon Inc |
| Highlands Bankshares |
Amazon and Highlands Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Highlands Bankshares
The main advantage of trading using opposite Amazon and Highlands Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Highlands Bankshares 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 Highlands Bankshares will offset losses from the drop in Highlands Bankshares' long position.The idea behind Amazon Inc and Highlands Bankshares 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.| Highlands Bankshares vs. First Bancorp | Highlands Bankshares vs. LINKBANCORP | Highlands Bankshares vs. Bankwell Financial Group | Highlands Bankshares vs. FS Bancorp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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