Correlation Between Amazon and VF
Can any of the company-specific risk be diversified away by investing in both Amazon and VF 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 VF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and VF Corporation, you can compare the effects of market volatilities on Amazon and VF 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 VF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and VF.
Diversification Opportunities for Amazon and VF
Very poor diversification
The 3 months correlation between Amazon and VF is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation 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 VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of Amazon i.e., Amazon and VF go up and down completely randomly.
Pair Corralation between Amazon and VF
Assuming the 90 days trading horizon Amazon is expected to generate 1.68 times less return on investment than VF. But when comparing it to its historical volatility, Amazon Inc is 2.49 times less risky than VF. It trades about 0.12 of its potential returns per unit of risk. VF Corporation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,914 in VF Corporation on October 29, 2024 and sell it today you would earn a total of 3,769 from holding VF Corporation or generate 96.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.19% |
| Values | Daily Returns |
Amazon Inc vs. VF Corp.
Performance |
| Timeline |
| Amazon Inc |
| VF Corporation |
Amazon and VF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and VF
The main advantage of trading using opposite Amazon and VF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, VF 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 VF will offset losses from the drop in VF's long position.| Amazon vs. Martin Marietta Materials, | Amazon vs. Globus Medical, | Amazon vs. Monster Beverage | Amazon vs. Omega Healthcare Investors, |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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