Correlation Between Amazon and Mesirow Enhanced

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

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

Diversification Opportunities for Amazon and Mesirow Enhanced

-0.55

Correlation Coefficient

Amazon  Mesirow Enhanced

Excellent diversification

The 3 months correlation between Amazon and Mesirow is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Mesirow Enhanced Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Enhanced Core 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 Mesirow Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Enhanced Core has no effect on the direction of Amazon i.e., Amazon and Mesirow Enhanced go up and down completely randomly.

Pair Corralation between Amazon and Mesirow Enhanced

Given the investment horizon of 90 days Amazon Inc is expected to generate 6.19 times more return on investment than Mesirow Enhanced. However, Amazon is 6.19 times more volatile than Mesirow Enhanced Core. It trades about 0.15 of its potential returns per unit of risk. Mesirow Enhanced Core is currently generating about 0.0 per unit of risk. If you would invest  17,625  in Amazon Inc on September 3, 2024 and sell it today you would earn a total of  3,164  from holding Amazon Inc or generate 17.95% return on investment over 90 days.

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

Amazon Inc  vs.  Mesirow Enhanced Core

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) 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.

Mesirow Enhanced Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesirow Enhanced Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mesirow Enhanced 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 Mesirow Enhanced

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

The idea behind Amazon Inc and Mesirow Enhanced Core 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.