Correlation Between Amazon and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Amazon and CenterPoint Energy 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 CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and CenterPoint Energy, you can compare the effects of market volatilities on Amazon and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and CenterPoint Energy.
Diversification Opportunities for Amazon and CenterPoint Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and CenterPoint is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Amazon i.e., Amazon and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Amazon and CenterPoint Energy
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.26 times more return on investment than CenterPoint Energy. However, Amazon is 1.26 times more volatile than CenterPoint Energy. It trades about 0.1 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.06 per unit of risk. If you would invest 12,948 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 8,123 from holding Amazon Inc or generate 62.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.31% |
| Values | Daily Returns |
Amazon Inc vs. CenterPoint Energy
Performance |
| Timeline |
| Amazon Inc |
| CenterPoint Energy |
Amazon and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and CenterPoint Energy
The main advantage of trading using opposite Amazon and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.The idea behind Amazon Inc and CenterPoint Energy 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.| CenterPoint Energy vs. CN MODERN DAIRY | CenterPoint Energy vs. Mobilezone Holding AG | CenterPoint Energy vs. PT Indofood Sukses | CenterPoint Energy vs. Perseus Mining Limited |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |