Correlation Between Amazon and Prudential
Can any of the company-specific risk be diversified away by investing in both Amazon and Prudential 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 Prudential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Prudential E Bond, you can compare the effects of market volatilities on Amazon and Prudential 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 Prudential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Prudential.
Diversification Opportunities for Amazon and Prudential
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Prudential is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Prudential E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential E Bond 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 Prudential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential E Bond has no effect on the direction of Amazon i.e., Amazon and Prudential go up and down completely randomly.
Pair Corralation between Amazon and Prudential
Given the investment horizon of 90 days Amazon Inc is expected to generate 5.69 times more return on investment than Prudential. However, Amazon is 5.69 times more volatile than Prudential E Bond. It trades about 0.24 of its potential returns per unit of risk. Prudential E Bond is currently generating about 0.0 per unit of risk. If you would invest 18,754 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 3,750 from holding Amazon Inc or generate 20.0% 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. Prudential E Bond
Performance |
| Timeline |
| Amazon Inc |
| Prudential E Bond |
Amazon and Prudential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Prudential
The main advantage of trading using opposite Amazon and Prudential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Prudential 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 Prudential will offset losses from the drop in Prudential's long position.The idea behind Amazon Inc and Prudential E Bond 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.| Prudential vs. Wealthbuilder Conservative Allocation | Prudential vs. Aqr Diversified Arbitrage | Prudential vs. Calvert Conservative Allocation | Prudential vs. Global Diversified Income |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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