Correlation Between Dow Jones and Amazon
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Amazon 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 Dow Jones and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Amazon Inc, you can compare the effects of market volatilities on Dow Jones and Amazon 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 Dow Jones with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Amazon.
Diversification Opportunities for Dow Jones and Amazon
Very weak diversification
The 3 months correlation between Dow and Amazon is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Dow Jones i.e., Dow Jones and Amazon go up and down completely randomly.
Pair Corralation between Dow Jones and Amazon
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.4 times more return on investment than Amazon. However, Dow Jones Industrial is 2.53 times less risky than Amazon. It trades about 0.16 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.04 per unit of risk. If you would invest 4,109,677 in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of 315,106 from holding Dow Jones Industrial or generate 7.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Dow Jones Industrial vs. Amazon Inc
Performance |
| Timeline |
Dow Jones and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Amazon Inc
Pair trading matchups for Amazon
Pair Trading with Dow Jones and Amazon
The main advantage of trading using opposite Dow Jones and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Amazon vs. Pfizer Inc | Amazon vs. Instituto Rosenbusch SA | Amazon vs. Sociedad Comercial del | Amazon vs. Ledesma SAAI |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |