Correlation Between Amazon and Pershing Square
Can any of the company-specific risk be diversified away by investing in both Amazon and Pershing Square 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 Pershing Square into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Pershing Square Holdings, you can compare the effects of market volatilities on Amazon and Pershing Square 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 Pershing Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Pershing Square.
Diversification Opportunities for Amazon and Pershing Square
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Pershing is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Amazon i.e., Amazon and Pershing Square go up and down completely randomly.
Pair Corralation between Amazon and Pershing Square
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.43 times more return on investment than Pershing Square. However, Amazon is 1.43 times more volatile than Pershing Square Holdings. It trades about 0.09 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.08 per unit of risk. If you would invest 12,425 in Amazon Inc on August 31, 2024 and sell it today you would earn a total of 8,364 from holding Amazon Inc or generate 67.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Pershing Square Holdings
Performance |
| Timeline |
| Amazon Inc |
| Pershing Square Holdings |
Amazon and Pershing Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Pershing Square
The main advantage of trading using opposite Amazon and Pershing Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Pershing Square 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 Pershing Square will offset losses from the drop in Pershing Square's long position.The idea behind Amazon Inc and Pershing Square Holdings 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.| Pershing Square vs. Pershing Square Holdings | Pershing Square vs. Hon Hai Precision | Pershing Square vs. Glaukos Corp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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