Correlation Between Amazon and Terex
Can any of the company-specific risk be diversified away by investing in both Amazon and Terex 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 Terex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Terex, you can compare the effects of market volatilities on Amazon and Terex 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 Terex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Terex.
Diversification Opportunities for Amazon and Terex
Very weak diversification
The 3 months correlation between Amazon and Terex is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex 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 Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of Amazon i.e., Amazon and Terex go up and down completely randomly.
Pair Corralation between Amazon and Terex
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.62 times more return on investment than Terex. However, Amazon Inc is 1.61 times less risky than Terex. It trades about 0.09 of its potential returns per unit of risk. Terex is currently generating about 0.03 per unit of risk. If you would invest 14,742 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 6,047 from holding Amazon Inc or generate 41.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Amazon Inc vs. Terex
Performance |
| Timeline |
| Amazon Inc |
| Terex |
Amazon and Terex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Terex
The main advantage of trading using opposite Amazon and Terex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Terex 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 Terex will offset losses from the drop in Terex's long position.The idea behind Amazon Inc and Terex 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.| Terex vs. Federal Agricultural Mortgage | Terex vs. Dairy Farm International | Terex vs. DAIRY FARM INTL | Terex vs. Regions Financial |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |