Correlation Between Amazon and Pan Pacific
Can any of the company-specific risk be diversified away by investing in both Amazon and Pan Pacific 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 Pan Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Pan Pacific International, you can compare the effects of market volatilities on Amazon and Pan Pacific 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 Pan Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Pan Pacific.
Diversification Opportunities for Amazon and Pan Pacific
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Pan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International 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 Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Amazon i.e., Amazon and Pan Pacific go up and down completely randomly.
Pair Corralation between Amazon and Pan Pacific
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.0 times more return on investment than Pan Pacific. However, Amazon is 1.0 times more volatile than Pan Pacific International. It trades about 0.2 of its potential returns per unit of risk. Pan Pacific International is currently generating about 0.12 per unit of risk. If you would invest 19,578 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 1,493 from holding Amazon Inc or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Amazon Inc vs. Pan Pacific International
Performance |
| Timeline |
| Amazon Inc |
| Pan Pacific International |
Amazon and Pan Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Pan Pacific
The main advantage of trading using opposite Amazon and Pan Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Pan Pacific 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 Pan Pacific will offset losses from the drop in Pan Pacific's long position.The idea behind Amazon Inc and Pan Pacific International 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.| Pan Pacific vs. MAROC TELECOM | Pan Pacific vs. Gamma Communications plc | Pan Pacific vs. North American Construction | Pan Pacific vs. TITAN MACHINERY |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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