Correlation Between Amazon and NIKKON HOLDINGS

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

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

Diversification Opportunities for Amazon and NIKKON HOLDINGS

0.5

Correlation Coefficient

Amazon  NIKKON HOLDINGS

Very weak diversification

The 3 months correlation between Amazon and NIKKON is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and NIKKON HOLDINGS TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKKON HOLDINGS TD 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 NIKKON HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKKON HOLDINGS TD has no effect on the direction of Amazon i.e., Amazon and NIKKON HOLDINGS go up and down completely randomly.

Pair Corralation between Amazon and NIKKON HOLDINGS

Assuming the 90 days horizon Amazon Inc is expected to generate 1.37 times more return on investment than NIKKON HOLDINGS. However, Amazon is 1.37 times more volatile than NIKKON HOLDINGS TD. It trades about 0.27 of its potential returns per unit of risk. NIKKON HOLDINGS TD is currently generating about 0.11 per unit of risk. If you would invest  17,460  in Amazon Inc on October 26, 2024 and sell it today you would earn a total of  5,130  from holding Amazon Inc or generate 29.38% return on investment over 90 days.

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

Amazon Inc  vs.  NIKKON HOLDINGS TD

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

NIKKON HOLDINGS TD

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NIKKON HOLDINGS TD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NIKKON HOLDINGS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Amazon and NIKKON HOLDINGS

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

The idea behind Amazon Inc and NIKKON HOLDINGS TD 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.