Correlation Between Amazon and MICROSOFT
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By analyzing existing cross correlation between Amazon Inc and MICROSOFT PORATION, you can compare the effects of market volatilities on Amazon and MICROSOFT 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 MICROSOFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and MICROSOFT.
Diversification Opportunities for Amazon and MICROSOFT
Modest diversification
The 3 months correlation between Amazon and MICROSOFT is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and MICROSOFT PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT PORATION 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 MICROSOFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICROSOFT PORATION has no effect on the direction of Amazon i.e., Amazon and MICROSOFT go up and down completely randomly.
Pair Corralation between Amazon and MICROSOFT
Given the investment horizon of 90 days Amazon is expected to generate 1.54 times less return on investment than MICROSOFT. But when comparing it to its historical volatility, Amazon Inc is 1.07 times less risky than MICROSOFT. It trades about 0.26 of its potential returns per unit of risk. MICROSOFT PORATION is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 6,613 in MICROSOFT PORATION on September 13, 2024 and sell it today you would earn a total of 1,082 from holding MICROSOFT PORATION or generate 16.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. MICROSOFT PORATION
Performance |
| Timeline |
| Amazon Inc |
| MICROSOFT PORATION |
Amazon and MICROSOFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and MICROSOFT
The main advantage of trading using opposite Amazon and MICROSOFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, MICROSOFT 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 MICROSOFT will offset losses from the drop in MICROSOFT's long position.The idea behind Amazon Inc and MICROSOFT PORATION 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.| MICROSOFT vs. AEP TEX INC | MICROSOFT vs. US BANK NATIONAL | MICROSOFT vs. Applied Blockchain | MICROSOFT vs. BigBearai Holdings |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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