Correlation Between Amazon and Stockland
Can any of the company-specific risk be diversified away by investing in both Amazon and Stockland 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 Stockland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Stockland, you can compare the effects of market volatilities on Amazon and Stockland 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 Stockland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Stockland.
Diversification Opportunities for Amazon and Stockland
Very good diversification
The 3 months correlation between Amazon and Stockland is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Stockland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stockland 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 Stockland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stockland has no effect on the direction of Amazon i.e., Amazon and Stockland go up and down completely randomly.
Pair Corralation between Amazon and Stockland
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.73 times more return on investment than Stockland. However, Amazon Inc is 1.36 times less risky than Stockland. It trades about 0.05 of its potential returns per unit of risk. Stockland is currently generating about 0.01 per unit of risk. If you would invest 18,215 in Amazon Inc on August 24, 2024 and sell it today you would earn a total of 1,623 from holding Amazon Inc or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Stockland
Performance |
| Timeline |
| Amazon Inc |
| Stockland |
Amazon and Stockland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Stockland
The main advantage of trading using opposite Amazon and Stockland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Stockland 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 Stockland will offset losses from the drop in Stockland's long position.The idea behind Amazon Inc and Stockland 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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