Correlation Between Amazon and GPS Participaes
Can any of the company-specific risk be diversified away by investing in both Amazon and GPS Participaes 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 GPS Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and GPS Participaes e, you can compare the effects of market volatilities on Amazon and GPS Participaes 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 GPS Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and GPS Participaes.
Diversification Opportunities for Amazon and GPS Participaes
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and GPS is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and GPS Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPS Participaes e 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 GPS Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPS Participaes e has no effect on the direction of Amazon i.e., Amazon and GPS Participaes go up and down completely randomly.
Pair Corralation between Amazon and GPS Participaes
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.95 times more return on investment than GPS Participaes. However, Amazon Inc is 1.05 times less risky than GPS Participaes. It trades about 0.2 of its potential returns per unit of risk. GPS Participaes e is currently generating about -0.08 per unit of risk. If you would invest 4,960 in Amazon Inc on November 2, 2024 and sell it today you would earn a total of 1,926 from holding Amazon Inc or generate 38.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. GPS Participaes e
Performance |
| Timeline |
| Amazon Inc |
| GPS Participaes e |
Amazon and GPS Participaes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and GPS Participaes
The main advantage of trading using opposite Amazon and GPS Participaes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, GPS Participaes 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 GPS Participaes will offset losses from the drop in GPS Participaes' long position.| Amazon vs. Cognizant Technology Solutions | Amazon vs. Elevance Health, | Amazon vs. Unity Software | Amazon vs. Clover Health Investments, |
| GPS Participaes vs. Taiwan Semiconductor Manufacturing | GPS Participaes vs. Apple Inc | GPS Participaes vs. Alibaba Group Holding | GPS Participaes vs. Microsoft |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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