Correlation Between Amazon and American Tower
Can any of the company-specific risk be diversified away by investing in both Amazon and American Tower 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 American Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and American Tower, you can compare the effects of market volatilities on Amazon and American Tower 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 American Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and American Tower.
Diversification Opportunities for Amazon and American Tower
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Amazon and American is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and American Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower 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 American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower has no effect on the direction of Amazon i.e., Amazon and American Tower go up and down completely randomly.
Pair Corralation between Amazon and American Tower
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.96 times more return on investment than American Tower. However, Amazon Inc is 1.04 times less risky than American Tower. It trades about 0.12 of its potential returns per unit of risk. American Tower is currently generating about 0.05 per unit of risk. If you would invest 3,570 in Amazon Inc on August 27, 2024 and sell it today you would earn a total of 2,163 from holding Amazon Inc or generate 60.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. American Tower
Performance |
| Timeline |
| Amazon Inc |
| American Tower |
Amazon and American Tower Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and American Tower
The main advantage of trading using opposite Amazon and American Tower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, American Tower 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 American Tower will offset losses from the drop in American Tower's long position.| Amazon vs. Ross Stores | Amazon vs. METISA Metalrgica Timboense | Amazon vs. Cognizant Technology Solutions | Amazon vs. Micron Technology |
| American Tower vs. Iron Mountain Incorporated | American Tower vs. Fras le SA | American Tower vs. Clave Indices De | American Tower vs. BTG Pactual Logstica |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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