Correlation Between Amazon and Sino AG
Can any of the company-specific risk be diversified away by investing in both Amazon and Sino AG 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 Sino AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Sino AG, you can compare the effects of market volatilities on Amazon and Sino AG 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 Sino AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Sino AG.
Diversification Opportunities for Amazon and Sino AG
Very good diversification
The 3 months correlation between Amazon and Sino is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sino AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino AG 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 Sino AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino AG has no effect on the direction of Amazon i.e., Amazon and Sino AG go up and down completely randomly.
Pair Corralation between Amazon and Sino AG
Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Sino AG. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.48 times less risky than Sino AG. The stock trades about -0.08 of its potential returns per unit of risk. The Sino AG is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 6,450 in Sino AG on December 28, 2024 and sell it today you would earn a total of 2,900 from holding Sino AG or generate 44.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.77% |
| Values | Daily Returns |
Amazon Inc vs. Sino AG
Performance |
| Timeline |
| Amazon Inc |
| Sino AG |
Amazon and Sino AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Sino AG
The main advantage of trading using opposite Amazon and Sino AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Sino AG 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 Sino AG will offset losses from the drop in Sino AG's long position.The idea behind Amazon Inc and Sino AG 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.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Sino AG as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Sino AG's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Sino AG's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Sino AG.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |