Correlation Between Amazon and Lkcm Equity

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

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

Diversification Opportunities for Amazon and Lkcm Equity

0.8

Correlation Coefficient

Amazon  Lkcm Equity

Very poor diversification

The 3 months correlation between Amazon and Lkcm is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Lkcm Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Equity Fund 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 Lkcm Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Equity Fund has no effect on the direction of Amazon i.e., Amazon and Lkcm Equity go up and down completely randomly.

Pair Corralation between Amazon and Lkcm Equity

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Lkcm Equity. In addition to that, Amazon is 1.91 times more volatile than Lkcm Equity Fund. It trades about -0.08 of its total potential returns per unit of risk. Lkcm Equity Fund is currently generating about -0.05 per unit of volatility. If you would invest  3,682  in Lkcm Equity Fund on December 28, 2024 and sell it today you would lose (111.00) from holding Lkcm Equity Fund or give up 3.01% of portfolio value over 90 days.

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

Amazon Inc  vs.  Lkcm Equity Fund

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.

Lkcm Equity Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lkcm Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lkcm Equity 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 Lkcm Equity

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

The idea behind Amazon Inc and Lkcm Equity Fund 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..