Correlation Between Amazon and Nationwide Small
Can any of the company-specific risk be diversified away by investing in both Amazon and Nationwide Small 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 Nationwide Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Nationwide Small Cap, you can compare the effects of market volatilities on Amazon and Nationwide Small 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 Nationwide Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Nationwide Small.
Diversification Opportunities for Amazon and Nationwide Small
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Nationwide is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap 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 Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Amazon i.e., Amazon and Nationwide Small go up and down completely randomly.
Pair Corralation between Amazon and Nationwide Small
Given the investment horizon of 90 days Amazon Inc is expected to generate 1.41 times more return on investment than Nationwide Small. However, Amazon is 1.41 times more volatile than Nationwide Small Cap. It trades about 0.24 of its potential returns per unit of risk. Nationwide Small Cap is currently generating about 0.18 per unit of risk. If you would invest 17,540 in Amazon Inc on September 9, 2024 and sell it today you would earn a total of 5,163 from holding Amazon Inc or generate 29.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Amazon Inc vs. Nationwide Small Cap
Performance |
Timeline |
Amazon Inc |
Nationwide Small Cap |
Amazon and Nationwide Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and Nationwide Small
The main advantage of trading using opposite Amazon and Nationwide Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Nationwide Small 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 Nationwide Small will offset losses from the drop in Nationwide Small's long position.The idea behind Amazon Inc and Nationwide Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Nationwide Small vs. Ab Global Bond | Nationwide Small vs. Morningstar Global Income | Nationwide Small vs. Rbc Bluebay Global | Nationwide Small vs. Dreyfusstandish Global Fixed |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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