Correlation Between Annaly Capital and Amazon

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

By analyzing existing cross correlation between Annaly Capital Management, and Amazon Inc, you can compare the effects of market volatilities on Annaly Capital and Amazon 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 Annaly Capital with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and Amazon.

Diversification Opportunities for Annaly Capital and Amazon

0.0

Correlation Coefficient

Annaly Capital  Amazon

Pay attention - limited upside

The 3 months correlation between Annaly and Amazon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management, and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Annaly Capital 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 Annaly Capital Management, are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Annaly Capital i.e., Annaly Capital and Amazon go up and down completely randomly.

Pair Corralation between Annaly Capital and Amazon

Assuming the 90 days trading horizon Annaly Capital Management, is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Annaly Capital Management, is 1.21 times less risky than Amazon. The stock trades about -0.13 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,468  in Amazon Inc on October 4, 2024 and sell it today you would earn a total of  302.00  from holding Amazon Inc or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Annaly Capital Management,  vs.  Amazon Inc

Annaly Capital Manag

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Annaly Capital Management, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Annaly Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amazon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Annaly Capital and Amazon

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

The idea behind Annaly Capital Management, and Amazon Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.