Correlation Between Amazon and United States
Can any of the company-specific risk be diversified away by investing in both Amazon and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and United States Basketball, you can compare the effects of market volatilities on Amazon and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and United States.
Diversification Opportunities for Amazon and United States
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and United is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and United States Basketball in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Basketball 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Basketball has no effect on the direction of Amazon i.e., Amazon and United States go up and down completely randomly.
Pair Corralation between Amazon and United States
Given the investment horizon of 90 days Amazon is expected to generate 15.45 times less return on investment than United States. But when comparing it to its historical volatility, Amazon Inc is 16.99 times less risky than United States. It trades about 0.1 of its potential returns per unit of risk. United States Basketball is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 38.00 in United States Basketball on September 4, 2024 and sell it today you would lose (11.00) from holding United States Basketball or give up 28.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 30.51% |
| Values | Daily Returns |
Amazon Inc vs. United States Basketball
Performance |
| Timeline |
| Amazon Inc |
| United States Basketball |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and United States
The main advantage of trading using opposite Amazon and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.The idea behind Amazon Inc and United States Basketball 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.| United States vs. A1 Group | United States vs. Roth CH Acquisition | United States vs. Awaysis Capital | United States vs. Starguide Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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