Correlation Between Amazon and VanEck ETF

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

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

Diversification Opportunities for Amazon and VanEck ETF

-0.37

Correlation Coefficient

Amazon  VanEck ETF

Very good diversification

The 3 months correlation between Amazon and VanEck is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and VanEck ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck ETF Trust 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 VanEck ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ETF Trust has no effect on the direction of Amazon i.e., Amazon and VanEck ETF go up and down completely randomly.

Pair Corralation between Amazon and VanEck ETF

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the VanEck ETF. In addition to that, Amazon is 22.08 times more volatile than VanEck ETF Trust. It trades about -0.08 of its total potential returns per unit of risk. VanEck ETF Trust is currently generating about 0.23 per unit of volatility. If you would invest  5,227  in VanEck ETF Trust on December 28, 2024 and sell it today you would earn a total of  55.00  from holding VanEck ETF Trust or generate 1.05% 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.  VanEck ETF Trust

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

VanEck ETF Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck ETF Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Amazon and VanEck ETF

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

The idea behind Amazon Inc and VanEck ETF Trust 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.