Correlation Between Amazon and United Internet
Can any of the company-specific risk be diversified away by investing in both Amazon and United Internet 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 Internet 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 Internet AG, you can compare the effects of market volatilities on Amazon and United Internet 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 Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and United Internet.
Diversification Opportunities for Amazon and United Internet
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and United is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Amazon i.e., Amazon and United Internet go up and down completely randomly.
Pair Corralation between Amazon and United Internet
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.52 times more return on investment than United Internet. However, Amazon Inc is 1.94 times less risky than United Internet. It trades about 0.23 of its potential returns per unit of risk. United Internet AG is currently generating about -0.16 per unit of risk. 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 Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amazon Inc vs. United Internet AG
Performance |
| Timeline |
| Amazon Inc |
| United Internet AG |
Amazon and United Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and United Internet
The main advantage of trading using opposite Amazon and United Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, United Internet 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 Internet will offset losses from the drop in United Internet's long position.The idea behind Amazon Inc and United Internet AG 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 Internet vs. Superior Plus Corp | United Internet vs. SIVERS SEMICONDUCTORS AB | United Internet vs. Norsk Hydro ASA | United Internet vs. Reliance Steel Aluminum |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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