Correlation Between Amazon and American Beacon
Can any of the company-specific risk be diversified away by investing in both Amazon and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and American Beacon Shapiro, you can compare the effects of market volatilities on Amazon and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and American Beacon.
Diversification Opportunities for Amazon and American Beacon
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and American is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Shapiro has no effect on the direction of Amazon i.e., Amazon and American Beacon go up and down completely randomly.
Pair Corralation between Amazon and American Beacon
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.78 times more return on investment than American Beacon. However, Amazon is 2.78 times more volatile than American Beacon Shapiro. It trades about 0.22 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about -0.15 per unit of risk. If you would invest 20,684 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 1,820 from holding Amazon Inc or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. American Beacon Shapiro
Performance |
| Timeline |
| Amazon Inc |
| American Beacon Shapiro |
Amazon and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and American Beacon
The main advantage of trading using opposite Amazon and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.The idea behind Amazon Inc and American Beacon Shapiro 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.| American Beacon vs. Fidelity Advisor Diversified | American Beacon vs. Federated Hermes Conservative | American Beacon vs. Guggenheim Diversified Income | American Beacon vs. Aqr Diversified Arbitrage |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |