Correlation Between Amazon and Virtus Kar
Can any of the company-specific risk be diversified away by investing in both Amazon and Virtus Kar 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 Virtus Kar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Virtus Kar Small Cap, you can compare the effects of market volatilities on Amazon and Virtus Kar 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 Virtus Kar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Virtus Kar.
Diversification Opportunities for Amazon and Virtus Kar
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and VIRTUS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small 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 Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Amazon i.e., Amazon and Virtus Kar go up and down completely randomly.
Pair Corralation between Amazon and Virtus Kar
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.48 times more return on investment than Virtus Kar. However, Amazon is 1.48 times more volatile than Virtus Kar Small Cap. It trades about 0.1 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about 0.08 per unit of risk. If you would invest 14,589 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 6,755 from holding Amazon Inc or generate 46.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Virtus Kar Small Cap
Performance |
| Timeline |
| Amazon Inc |
| Virtus Kar Small |
Amazon and Virtus Kar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Virtus Kar
The main advantage of trading using opposite Amazon and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Virtus Kar 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 Virtus Kar will offset losses from the drop in Virtus Kar's long position.The idea behind Amazon Inc and Virtus Kar Small Cap 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.| Virtus Kar vs. Virtus Kar Mid Cap | Virtus Kar vs. Midcap Fund Institutional | Virtus Kar vs. Morgan Stanley Multi | Virtus Kar vs. Growth Portfolio Class |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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