Correlation Between Amazon and Tullow Oil
Can any of the company-specific risk be diversified away by investing in both Amazon and Tullow Oil 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 Tullow Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Tullow Oil PLC, you can compare the effects of market volatilities on Amazon and Tullow Oil 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 Tullow Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Tullow Oil.
Diversification Opportunities for Amazon and Tullow Oil
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Amazon and Tullow is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Tullow Oil PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tullow Oil PLC 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 Tullow Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tullow Oil PLC has no effect on the direction of Amazon i.e., Amazon and Tullow Oil go up and down completely randomly.
Pair Corralation between Amazon and Tullow Oil
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.29 times more return on investment than Tullow Oil. However, Amazon Inc is 3.4 times less risky than Tullow Oil. It trades about 0.06 of its potential returns per unit of risk. Tullow Oil PLC is currently generating about -0.04 per unit of risk. If you would invest 17,834 in Amazon Inc on November 28, 2024 and sell it today you would earn a total of 3,437 from holding Amazon Inc or generate 19.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Tullow Oil PLC
Performance |
| Timeline |
| Amazon Inc |
| Tullow Oil PLC |
Amazon and Tullow Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Tullow Oil
The main advantage of trading using opposite Amazon and Tullow Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Tullow Oil 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 Tullow Oil will offset losses from the drop in Tullow Oil's long position.The idea behind Amazon Inc and Tullow Oil PLC 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.| Tullow Oil vs. San Leon Energy | Tullow Oil vs. Dno ASA | Tullow Oil vs. PetroShale | Tullow Oil vs. Horizon Oil Limited |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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