Correlation Between Amazon and ISHARES IV
Can any of the company-specific risk be diversified away by investing in both Amazon and ISHARES IV 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 ISHARES IV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and ISHARES IV PLC, you can compare the effects of market volatilities on Amazon and ISHARES IV 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 ISHARES IV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and ISHARES IV.
Diversification Opportunities for Amazon and ISHARES IV
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and ISHARES is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and ISHARES IV PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISHARES IV PLC 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 ISHARES IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISHARES IV PLC has no effect on the direction of Amazon i.e., Amazon and ISHARES IV go up and down completely randomly.
Pair Corralation between Amazon and ISHARES IV
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.85 times more return on investment than ISHARES IV. However, Amazon is 1.85 times more volatile than ISHARES IV PLC. It trades about 0.1 of its potential returns per unit of risk. ISHARES IV PLC is currently generating about 0.13 per unit of risk. If you would invest 9,158 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 12,186 from holding Amazon Inc or generate 133.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 46.06% |
| Values | Daily Returns |
Amazon Inc vs. ISHARES IV PLC
Performance |
| Timeline |
| Amazon Inc |
| ISHARES IV PLC |
Amazon and ISHARES IV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and ISHARES IV
The main advantage of trading using opposite Amazon and ISHARES IV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, ISHARES IV 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 ISHARES IV will offset losses from the drop in ISHARES IV's long position.The idea behind Amazon Inc and ISHARES IV PLC 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.| ISHARES IV vs. Scottish Mortgage Investment | ISHARES IV vs. VinaCapital Vietnam Opportunity | ISHARES IV vs. Edinburgh Worldwide Investment | ISHARES IV vs. Baillie Gifford Growth |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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