Correlation Between Amazon and PFA Invest
Can any of the company-specific risk be diversified away by investing in both Amazon and PFA Invest 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 PFA Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and PFA Invest Balance, you can compare the effects of market volatilities on Amazon and PFA Invest 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 PFA Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and PFA Invest.
Diversification Opportunities for Amazon and PFA Invest
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Amazon and PFA is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and PFA Invest Balance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFA Invest Balance 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 PFA Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFA Invest Balance has no effect on the direction of Amazon i.e., Amazon and PFA Invest go up and down completely randomly.
Pair Corralation between Amazon and PFA Invest
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.38 times more return on investment than PFA Invest. However, Amazon is 2.38 times more volatile than PFA Invest Balance. It trades about -0.05 of its potential returns per unit of risk. PFA Invest Balance is currently generating about -0.23 per unit of risk. If you would invest 17,971 in Amazon Inc on January 23, 2024 and sell it today you would lose (248.00) from holding Amazon Inc or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 90.0% |
| Values | Daily Returns |
Amazon Inc vs. PFA Invest Balance
Performance |
| Timeline |
| Amazon Inc |
| PFA Invest Balance |
Amazon and PFA Invest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and PFA Invest
The main advantage of trading using opposite Amazon and PFA Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, PFA Invest 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 PFA Invest will offset losses from the drop in PFA Invest's long position.The idea behind Amazon Inc and PFA Invest Balance 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.| PFA Invest vs. Novo Nordisk AS | PFA Invest vs. Nordea Bank Abp | PFA Invest vs. DSV Panalpina AS | PFA Invest vs. AP Mller |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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