Correlation Between Amazon and International Equity
Can any of the company-specific risk be diversified away by investing in both Amazon and International Equity 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 International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and International Equity Index, you can compare the effects of market volatilities on Amazon and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and International Equity.
Diversification Opportunities for Amazon and International Equity
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and International is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Amazon i.e., Amazon and International Equity go up and down completely randomly.
Pair Corralation between Amazon and International Equity
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.14 times more return on investment than International Equity. However, Amazon is 2.14 times more volatile than International Equity Index. It trades about 0.1 of its potential returns per unit of risk. International Equity Index is currently generating about 0.05 per unit of risk. If you would invest 15,407 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 7,097 from holding Amazon Inc or generate 46.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Amazon Inc vs. International Equity Index
Performance |
| Timeline |
| Amazon Inc |
| International Equity |
Amazon and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and International Equity
The main advantage of trading using opposite Amazon and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.The idea behind Amazon Inc and International Equity Index 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.| International Equity vs. Eip Growth And | International Equity vs. Praxis Growth Index | International Equity vs. Artisan Small Cap | International Equity vs. Franklin Growth Opportunities |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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