Correlation Between Amazon and Truist Financial
Can any of the company-specific risk be diversified away by investing in both Amazon and Truist Financial 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 Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Truist Financial, you can compare the effects of market volatilities on Amazon and Truist Financial 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 Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Truist Financial.
Diversification Opportunities for Amazon and Truist Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Truist is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Amazon i.e., Amazon and Truist Financial go up and down completely randomly.
Pair Corralation between Amazon and Truist Financial
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.88 times more return on investment than Truist Financial. However, Amazon Inc is 1.13 times less risky than Truist Financial. It trades about -0.1 of its potential returns per unit of risk. Truist Financial is currently generating about -0.26 per unit of risk. If you would invest 6,863 in Amazon Inc on October 14, 2024 and sell it today you would lose (200.00) from holding Amazon Inc or give up 2.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Truist Financial
Performance |
| Timeline |
| Amazon Inc |
| Truist Financial |
Amazon and Truist Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Truist Financial
The main advantage of trading using opposite Amazon and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial's long position.| Amazon vs. Patria Investments Limited | Amazon vs. Warner Music Group | Amazon vs. Clover Health Investments, | Amazon vs. Paycom Software |
| Truist Financial vs. Taiwan Semiconductor Manufacturing | Truist Financial vs. Apple Inc | Truist Financial vs. Alibaba Group Holding | Truist Financial vs. Banco Santander Chile |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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