Correlation Between Amazon and Sweco AB
Can any of the company-specific risk be diversified away by investing in both Amazon and Sweco AB 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 Sweco AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Sweco AB, you can compare the effects of market volatilities on Amazon and Sweco AB 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 Sweco AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Sweco AB.
Diversification Opportunities for Amazon and Sweco AB
Good diversification
The 3 months correlation between Amazon and Sweco is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sweco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweco AB 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 Sweco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweco AB has no effect on the direction of Amazon i.e., Amazon and Sweco AB go up and down completely randomly.
Pair Corralation between Amazon and Sweco AB
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.94 times more return on investment than Sweco AB. However, Amazon Inc is 1.06 times less risky than Sweco AB. It trades about 0.19 of its potential returns per unit of risk. Sweco AB is currently generating about -0.18 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 | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amazon Inc vs. Sweco AB
Performance |
| Timeline |
| Amazon Inc |
| Sweco AB |
Amazon and Sweco AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Sweco AB
The main advantage of trading using opposite Amazon and Sweco AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Sweco AB 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 Sweco AB will offset losses from the drop in Sweco AB's long position.The idea behind Amazon Inc and Sweco AB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |