Correlation Between Amazon and Hospital Mater
Can any of the company-specific risk be diversified away by investing in both Amazon and Hospital Mater 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 Hospital Mater into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Hospital Mater Dei, you can compare the effects of market volatilities on Amazon and Hospital Mater 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 Hospital Mater. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Hospital Mater.
Diversification Opportunities for Amazon and Hospital Mater
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and Hospital is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Hospital Mater Dei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hospital Mater Dei 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 Hospital Mater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hospital Mater Dei has no effect on the direction of Amazon i.e., Amazon and Hospital Mater go up and down completely randomly.
Pair Corralation between Amazon and Hospital Mater
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.71 times more return on investment than Hospital Mater. However, Amazon Inc is 1.4 times less risky than Hospital Mater. It trades about 0.46 of its potential returns per unit of risk. Hospital Mater Dei is currently generating about -0.39 per unit of risk. If you would invest 6,048 in Amazon Inc on September 27, 2024 and sell it today you would earn a total of 932.00 from holding Amazon Inc or generate 15.41% 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. Hospital Mater Dei
Performance |
| Timeline |
| Amazon Inc |
| Hospital Mater Dei |
Amazon and Hospital Mater Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Hospital Mater
The main advantage of trading using opposite Amazon and Hospital Mater positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Hospital Mater 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 Hospital Mater will offset losses from the drop in Hospital Mater's long position.The idea behind Amazon Inc and Hospital Mater Dei 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.| Hospital Mater vs. DaVita Inc | Hospital Mater vs. Accenture plc | Hospital Mater vs. Morgan Stanley | Hospital Mater vs. Amazon Inc |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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