Correlation Between Amazon and Madison High
Can any of the company-specific risk be diversified away by investing in both Amazon and Madison High 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 Madison High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Madison High Quality, you can compare the effects of market volatilities on Amazon and Madison High 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 Madison High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Madison High.
Diversification Opportunities for Amazon and Madison High
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and Madison is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Madison High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison High Quality 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 Madison High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison High Quality has no effect on the direction of Amazon i.e., Amazon and Madison High go up and down completely randomly.
Pair Corralation between Amazon and Madison High
Given the investment horizon of 90 days Amazon Inc is expected to generate 10.23 times more return on investment than Madison High. However, Amazon is 10.23 times more volatile than Madison High Quality. It trades about 0.17 of its potential returns per unit of risk. Madison High Quality is currently generating about -0.1 per unit of risk. If you would invest 18,196 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 2,593 from holding Amazon Inc or generate 14.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Madison High Quality
Performance |
| Timeline |
| Amazon Inc |
| Madison High Quality |
Amazon and Madison High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Madison High
The main advantage of trading using opposite Amazon and Madison High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Madison High 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 Madison High will offset losses from the drop in Madison High's long position.The idea behind Amazon Inc and Madison High Quality 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.| Madison High vs. Prudential Real Estate | Madison High vs. Great West Real Estate | Madison High vs. Commonwealth Real Estate | Madison High vs. Guggenheim Risk Managed |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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