Correlation Between Amazon and Money Market
Can any of the company-specific risk be diversified away by investing in both Amazon and Money Market 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 Money Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Money Market Obligations, you can compare the effects of market volatilities on Amazon and Money Market 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 Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Money Market.
Diversification Opportunities for Amazon and Money Market
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Amazon and Money is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations 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 Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Amazon i.e., Amazon and Money Market go up and down completely randomly.
Pair Corralation between Amazon and Money Market
If you would invest 20,709 in Amazon Inc on September 7, 2024 and sell it today you would earn a total of 1,346 from holding Amazon Inc or generate 6.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Amazon Inc vs. Money Market Obligations
Performance |
Timeline |
Amazon Inc |
Money Market Obligations |
Amazon and Money Market Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and Money Market
The main advantage of trading using opposite Amazon and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market's long position.The idea behind Amazon Inc and Money Market Obligations 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.Money Market vs. Nasdaq 100 2x Strategy | Money Market vs. Pace International Emerging | Money Market vs. Artisan Emerging Markets | Money Market vs. Barings Emerging Markets |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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