Correlation Between Amazon and Ziccum AB
Can any of the company-specific risk be diversified away by investing in both Amazon and Ziccum AB 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 Ziccum AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Ziccum AB, you can compare the effects of market volatilities on Amazon and Ziccum AB 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 Ziccum AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Ziccum AB.
Diversification Opportunities for Amazon and Ziccum AB
Pay attention - limited upside
The 3 months correlation between Amazon and Ziccum is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Ziccum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziccum AB 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 Ziccum AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziccum AB has no effect on the direction of Amazon i.e., Amazon and Ziccum AB go up and down completely randomly.
Pair Corralation between Amazon and Ziccum AB
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.18 times more return on investment than Ziccum AB. However, Amazon Inc is 5.67 times less risky than Ziccum AB. It trades about 0.2 of its potential returns per unit of risk. Ziccum AB is currently generating about -0.32 per unit of risk. If you would invest 19,578 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 1,493 from holding Amazon Inc or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Amazon Inc vs. Ziccum AB
Performance |
| Timeline |
| Amazon Inc |
| Ziccum AB |
Amazon and Ziccum AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Ziccum AB
The main advantage of trading using opposite Amazon and Ziccum AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Ziccum AB 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 Ziccum AB will offset losses from the drop in Ziccum AB's long position.The idea behind Amazon Inc and Ziccum AB 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.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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