Correlation Between Amazon and Vanguard USD

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

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

Diversification Opportunities for Amazon and Vanguard USD

0.76

Correlation Coefficient

Amazon  Vanguard USD

Poor diversification

The 3 months correlation between Amazon and Vanguard is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Vanguard USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Corporate 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 Vanguard USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Corporate has no effect on the direction of Amazon i.e., Amazon and Vanguard USD go up and down completely randomly.

Pair Corralation between Amazon and Vanguard USD

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Vanguard USD. In addition to that, Amazon is 3.72 times more volatile than Vanguard USD Corporate. It trades about -0.12 of its total potential returns per unit of risk. Vanguard USD Corporate is currently generating about -0.06 per unit of volatility. If you would invest  4,614  in Vanguard USD Corporate on December 30, 2024 and sell it today you would lose (86.00) from holding Vanguard USD Corporate or give up 1.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Amazon Inc  vs.  Vanguard USD Corporate

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vanguard USD Corporate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard USD Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard USD is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Amazon and Vanguard USD

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

The idea behind Amazon Inc and Vanguard USD Corporate 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.