Correlation Between Amazon and Union Electric
Can any of the company-specific risk be diversified away by investing in both Amazon and Union Electric 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 Union Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Union Electric, you can compare the effects of market volatilities on Amazon and Union Electric 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 Union Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Union Electric.
Diversification Opportunities for Amazon and Union Electric
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Amazon and Union is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of Amazon i.e., Amazon and Union Electric go up and down completely randomly.
Pair Corralation between Amazon and Union Electric
If you would invest 20,684 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 1,820 from holding Amazon Inc or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Amazon Inc vs. Union Electric
Performance |
| Timeline |
| Amazon Inc |
| Union Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and Union Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Union Electric
The main advantage of trading using opposite Amazon and Union Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Union Electric 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 Union Electric will offset losses from the drop in Union Electric's long position.The idea behind Amazon Inc and Union Electric 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.| Union Electric vs. IDACORP | Union Electric vs. Pinnacle West Capital | Union Electric vs. Portland General Electric | Union Electric vs. CMS Energy |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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