Correlation Between Amazon and Amg Gwk

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

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

Diversification Opportunities for Amazon and Amg Gwk

0.96

Correlation Coefficient

Amazon  Amg Gwk

Almost no diversification

The 3 months correlation between Amazon and Amg is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Amg Gwk Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Gwk Smallmid 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 Amg Gwk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Gwk Smallmid has no effect on the direction of Amazon i.e., Amazon and Amg Gwk go up and down completely randomly.

Pair Corralation between Amazon and Amg Gwk

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Amg Gwk. In addition to that, Amazon is 1.61 times more volatile than Amg Gwk Smallmid. It trades about -0.09 of its total potential returns per unit of risk. Amg Gwk Smallmid is currently generating about -0.09 per unit of volatility. If you would invest  1,911  in Amg Gwk Smallmid on December 27, 2024 and sell it today you would lose (118.00) from holding Amg Gwk Smallmid or give up 6.17% of portfolio value over 90 days.

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

Amazon Inc  vs.  Amg Gwk Smallmid

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.

Amg Gwk Smallmid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amg Gwk Smallmid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Amazon and Amg Gwk

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

The idea behind Amazon Inc and Amg Gwk Smallmid 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.