Correlation Between Amazon and Victory Tax

Can any of the company-specific risk be diversified away by investing in both Amazon and Victory Tax 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 Victory Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and Victory Tax Exempt Fund, you can compare the effects of market volatilities on Amazon and Victory Tax 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 Victory Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Victory Tax.

Diversification Opportunities for Amazon and Victory Tax

-0.11

Correlation Coefficient

Amazon  Victory Tax

Good diversification

The 3 months correlation between Amazon and Victory is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Victory Tax Exempt Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Tax Exempt 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 Victory Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Tax Exempt has no effect on the direction of Amazon i.e., Amazon and Victory Tax go up and down completely randomly.

Pair Corralation between Amazon and Victory Tax

Given the investment horizon of 90 days Amazon Inc is expected to generate 5.34 times more return on investment than Victory Tax. However, Amazon is 5.34 times more volatile than Victory Tax Exempt Fund. It trades about 0.15 of its potential returns per unit of risk. Victory Tax Exempt Fund is currently generating about 0.07 per unit of risk. If you would invest  17,625  in Amazon Inc on September 3, 2024 and sell it today you would earn a total of  3,164  from holding Amazon Inc or generate 17.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Victory Tax Exempt Fund

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Victory Tax Exempt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Tax Exempt Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Victory Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and Victory Tax

The main advantage of trading using opposite Amazon and Victory Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Victory Tax 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 Victory Tax will offset losses from the drop in Victory Tax's long position.

The idea behind Amazon Inc and Victory Tax Exempt Fund 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.