Correlation Between Textron and Amazon
Can any of the company-specific risk be diversified away by investing in both Textron 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 Textron and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and Amazon Inc, you can compare the effects of market volatilities on Textron 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 Textron with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and Amazon.
Diversification Opportunities for Textron and Amazon
Very good diversification
The 3 months correlation between Textron and Amazon is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Textron 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 Textron 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 Textron i.e., Textron and Amazon go up and down completely randomly.
Pair Corralation between Textron and Amazon
Assuming the 90 days trading horizon Textron is expected to under-perform the Amazon. In addition to that, Textron is 1.3 times more volatile than Amazon Inc. It trades about -0.01 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.11 per unit of volatility. If you would invest 455,565 in Amazon Inc on October 20, 2024 and sell it today you would earn a total of 14,011 from holding Amazon Inc or generate 3.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Textron vs. Amazon Inc
Performance |
| Timeline |
| Textron |
| Amazon Inc |
Textron and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and Amazon
The main advantage of trading using opposite Textron and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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.| Textron vs. McEwen Mining | Textron vs. Grupo Carso SAB | Textron vs. Verizon Communications | Textron vs. Samsung Electronics Co |
| Amazon vs. McEwen Mining | Amazon vs. Monster Beverage Corp | Amazon vs. Delta Air Lines | Amazon vs. Grupo Carso SAB |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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