Correlation Between Amazon and Sound Point
Can any of the company-specific risk be diversified away by investing in both Amazon and Sound Point 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 Sound Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Sound Point Acquisition, you can compare the effects of market volatilities on Amazon and Sound Point 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 Sound Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Sound Point.
Diversification Opportunities for Amazon and Sound Point
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and Sound is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sound Point Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Point Acquisition 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 Sound Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Point Acquisition has no effect on the direction of Amazon i.e., Amazon and Sound Point go up and down completely randomly.
Pair Corralation between Amazon and Sound Point
If you would invest 17,834 in Amazon Inc on September 1, 2024 and sell it today you would earn a total of 2,955 from holding Amazon Inc or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 0.79% |
| Values | Daily Returns |
Amazon Inc vs. Sound Point Acquisition
Performance |
| Timeline |
| Amazon Inc |
| Sound Point Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and Sound Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Sound Point
The main advantage of trading using opposite Amazon and Sound Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Sound Point 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 Sound Point will offset losses from the drop in Sound Point's long position.The idea behind Amazon Inc and Sound Point Acquisition 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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