Correlation Between Amazon and Nuveen Small

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

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

Diversification Opportunities for Amazon and Nuveen Small

0.84

Correlation Coefficient

Amazon  Nuveen Small

Very poor diversification

The 3 months correlation between Amazon and Nuveen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Nuveen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Small Cap 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 Nuveen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Small Cap has no effect on the direction of Amazon i.e., Amazon and Nuveen Small go up and down completely randomly.

Pair Corralation between Amazon and Nuveen Small

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.35 times more return on investment than Nuveen Small. However, Amazon is 1.35 times more volatile than Nuveen Small Cap. It trades about 0.17 of its potential returns per unit of risk. Nuveen Small Cap is currently generating about 0.16 per unit of risk. If you would invest  17,789  in Amazon Inc on September 5, 2024 and sell it today you would earn a total of  3,555  from holding Amazon Inc or generate 19.98% return on investment over 90 days.

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

Amazon Inc  vs.  Nuveen Small Cap

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) 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.

Nuveen Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nuveen Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Nuveen Small

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

The idea behind Amazon Inc and Nuveen Small Cap 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.