Correlation Between Amazon and Dfa One

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

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

Diversification Opportunities for Amazon and Dfa One

-0.61

Correlation Coefficient

Amazon  Dfa One

Excellent diversification

The 3 months correlation between Amazon and Dfa is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Dfa One Year Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa One Year 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 Dfa One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa One Year has no effect on the direction of Amazon i.e., Amazon and Dfa One go up and down completely randomly.

Pair Corralation between Amazon and Dfa One

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Dfa One. In addition to that, Amazon is 41.56 times more volatile than Dfa One Year Fixed. It trades about -0.1 of its total potential returns per unit of risk. Dfa One Year Fixed is currently generating about 0.4 per unit of volatility. If you would invest  1,017  in Dfa One Year Fixed on December 25, 2024 and sell it today you would earn a total of  10.00  from holding Dfa One Year Fixed or generate 0.98% return on investment over 90 days.

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

Amazon Inc  vs.  Dfa One Year Fixed

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.

Dfa One Year

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa One Year Fixed are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dfa One 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 Dfa One

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

The idea behind Amazon Inc and Dfa One Year Fixed 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.