Correlation Between Meta Platforms and Amazon
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Amazon Inc, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Amazon.
Diversification Opportunities for Meta Platforms and Amazon
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Meta and Amazon is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and Amazon go up and down completely randomly.
Pair Corralation between Meta Platforms and Amazon
Allowing for the 90-day total investment horizon Meta Platforms is expected to under-perform the Amazon. In addition to that, Meta Platforms is 1.45 times more volatile than Amazon Inc. It trades about -0.14 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.05 per unit of volatility. If you would invest 11,641 in Amazon Inc on January 25, 2024 and sell it today you would earn a total of 6,094 from holding Amazon Inc or generate 52.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 7.47% |
Values | Daily Returns |
Meta Platforms vs. Amazon Inc
Performance |
Timeline |
Meta Platforms |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon Inc |
Meta Platforms and Amazon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Meta Platforms and Amazon
The main advantage of trading using opposite Meta Platforms and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.Meta Platforms vs. Meta Platforms | Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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