Correlation Between IncomeShares Amazon and IncomeShares SP500

Can any of the company-specific risk be diversified away by investing in both IncomeShares Amazon and IncomeShares SP500 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 IncomeShares Amazon and IncomeShares SP500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IncomeShares Amazon Options and IncomeShares SP500 Options, you can compare the effects of market volatilities on IncomeShares Amazon and IncomeShares SP500 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 IncomeShares Amazon with a short position of IncomeShares SP500. Check out your portfolio center. Please also check ongoing floating volatility patterns of IncomeShares Amazon and IncomeShares SP500.

Diversification Opportunities for IncomeShares Amazon and IncomeShares SP500

-0.33

Correlation Coefficient

IncomeShares Amazon  IncomeShares SP500

Very good diversification

The 3 months correlation between IncomeShares and IncomeShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding IncomeShares Amazon Options and IncomeShares SP500 Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares SP500 and IncomeShares 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 IncomeShares Amazon Options are associated (or correlated) with IncomeShares SP500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares SP500 has no effect on the direction of IncomeShares Amazon i.e., IncomeShares Amazon and IncomeShares SP500 go up and down completely randomly.

Pair Corralation between IncomeShares Amazon and IncomeShares SP500

Assuming the 90 days trading horizon IncomeShares Amazon Options is expected to generate 1.44 times more return on investment than IncomeShares SP500. However, IncomeShares Amazon is 1.44 times more volatile than IncomeShares SP500 Options. It trades about 0.04 of its potential returns per unit of risk. IncomeShares SP500 Options is currently generating about 0.03 per unit of risk. If you would invest  1,052  in IncomeShares Amazon Options on October 10, 2024 and sell it today you would earn a total of  7.00  from holding IncomeShares Amazon Options or generate 0.67% return on investment over 90 days.

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

IncomeShares Amazon Options  vs.  IncomeShares SP500 Options

IncomeShares Amazon

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares Amazon Options are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, IncomeShares Amazon exhibited solid returns over the last few months and may actually be approaching a breakup point.

IncomeShares SP500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares SP500 Options are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IncomeShares SP500 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IncomeShares Amazon and IncomeShares SP500

The main advantage of trading using opposite IncomeShares Amazon and IncomeShares SP500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IncomeShares Amazon position performs unexpectedly, IncomeShares SP500 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 IncomeShares SP500 will offset losses from the drop in IncomeShares SP500's long position.

The idea behind IncomeShares Amazon Options and IncomeShares SP500 Options 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.