Correlation Between Amazon and Karoon Energy
Can any of the company-specific risk be diversified away by investing in both Amazon and Karoon 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 Karoon 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 Karoon Energy, you can compare the effects of market volatilities on Amazon and Karoon 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 Karoon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Karoon Energy.
Diversification Opportunities for Amazon and Karoon Energy
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and Karoon is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Karoon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karoon 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 Karoon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karoon Energy has no effect on the direction of Amazon i.e., Amazon and Karoon Energy go up and down completely randomly.
Pair Corralation between Amazon and Karoon Energy
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.8 times more return on investment than Karoon Energy. However, Amazon Inc is 1.24 times less risky than Karoon Energy. It trades about 0.19 of its potential returns per unit of risk. Karoon Energy is currently generating about 0.03 per unit of risk. If you would invest 19,578 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 1,493 from holding Amazon Inc or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amazon Inc vs. Karoon Energy
Performance |
| Timeline |
| Amazon Inc |
| Karoon Energy |
Amazon and Karoon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Karoon Energy
The main advantage of trading using opposite Amazon and Karoon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Karoon 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 Karoon Energy will offset losses from the drop in Karoon Energy's long position.The idea behind Amazon Inc and Karoon 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.| Karoon Energy vs. GALENA MINING LTD | Karoon Energy vs. OFFICE DEPOT | Karoon Energy vs. PKSHA TECHNOLOGY INC | Karoon Energy vs. MTI WIRELESS EDGE |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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