Correlation Between Amazon and SWISS WATER
Can any of the company-specific risk be diversified away by investing in both Amazon and SWISS WATER 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 SWISS WATER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on Amazon and SWISS WATER 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 SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and SWISS WATER.
Diversification Opportunities for Amazon and SWISS WATER
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and SWISS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE 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 SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of Amazon i.e., Amazon and SWISS WATER go up and down completely randomly.
Pair Corralation between Amazon and SWISS WATER
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.64 times more return on investment than SWISS WATER. However, Amazon Inc is 1.56 times less risky than SWISS WATER. It trades about 0.26 of its potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about 0.08 per unit of risk. If you would invest 16,780 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 4,885 from holding Amazon Inc or generate 29.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Amazon Inc vs. SWISS WATER DECAFFCOFFEE
Performance |
Timeline |
Amazon Inc |
SWISS WATER DECAFFCOFFEE |
Amazon and SWISS WATER Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and SWISS WATER
The main advantage of trading using opposite Amazon and SWISS WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, SWISS WATER 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 SWISS WATER will offset losses from the drop in SWISS WATER's long position.Amazon vs. Verizon Communications | Amazon vs. INTERSHOP Communications Aktiengesellschaft | Amazon vs. Singapore Telecommunications Limited | Amazon vs. MTI WIRELESS EDGE |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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