Correlation Between Amazon and Electronics Fund
Can any of the company-specific risk be diversified away by investing in both Amazon and Electronics Fund 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 Electronics Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Electronics Fund Class, you can compare the effects of market volatilities on Amazon and Electronics Fund 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 Electronics Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Electronics Fund.
Diversification Opportunities for Amazon and Electronics Fund
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Electronics is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Electronics Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Fund Class 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 Electronics Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Fund Class has no effect on the direction of Amazon i.e., Amazon and Electronics Fund go up and down completely randomly.
Pair Corralation between Amazon and Electronics Fund
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.68 times more return on investment than Electronics Fund. However, Amazon Inc is 1.47 times less risky than Electronics Fund. It trades about 0.0 of its potential returns per unit of risk. Electronics Fund Class is currently generating about -0.21 per unit of risk. If you would invest 17,971 in Amazon Inc on January 25, 2024 and sell it today you would lose (17.00) from holding Amazon Inc or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Electronics Fund Class
Performance |
| Timeline |
| Amazon Inc |
| Electronics Fund Class |
Amazon and Electronics Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Electronics Fund
The main advantage of trading using opposite Amazon and Electronics Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Electronics Fund 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 Electronics Fund will offset losses from the drop in Electronics Fund's long position.The idea behind Amazon Inc and Electronics Fund Class 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.| Electronics Fund vs. VivoPower International PLC | Electronics Fund vs. Exela Technologies Preferred | Electronics Fund vs. Wetouch Technology Common | Electronics Fund vs. Basic Materials Fund |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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