Correlation Between Amazon and SEEK
Can any of the company-specific risk be diversified away by investing in both Amazon and SEEK 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 SEEK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and SEEK Limited, you can compare the effects of market volatilities on Amazon and SEEK 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 SEEK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and SEEK.
Diversification Opportunities for Amazon and SEEK
Excellent diversification
The 3 months correlation between Amazon and SEEK is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and SEEK Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEEK Limited 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 SEEK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEEK Limited has no effect on the direction of Amazon i.e., Amazon and SEEK go up and down completely randomly.
Pair Corralation between Amazon and SEEK
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.06 times more return on investment than SEEK. However, Amazon is 1.06 times more volatile than SEEK Limited. It trades about 0.09 of its potential returns per unit of risk. SEEK Limited is currently generating about 0.01 per unit of risk. If you would invest 9,249 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 11,540 from holding Amazon Inc or generate 124.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 62.83% |
| Values | Daily Returns |
Amazon Inc vs. SEEK Limited
Performance |
| Timeline |
| Amazon Inc |
| SEEK Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and SEEK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and SEEK
The main advantage of trading using opposite Amazon and SEEK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, SEEK 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 SEEK will offset losses from the drop in SEEK's long position.The idea behind Amazon Inc and SEEK Limited 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |