Correlation Between Amazon and MSAD Insurance

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

By analyzing existing cross correlation between Amazon Inc and MSAD Insurance Group, you can compare the effects of market volatilities on Amazon and MSAD Insurance 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 MSAD Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and MSAD Insurance.

Diversification Opportunities for Amazon and MSAD Insurance

0.21

Correlation Coefficient

Amazon  MSAD Insurance

Modest diversification

The 3 months correlation between Amazon and MSAD is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of Amazon i.e., Amazon and MSAD Insurance go up and down completely randomly.

Pair Corralation between Amazon and MSAD Insurance

Given the investment horizon of 90 days Amazon is expected to generate 7.34 times less return on investment than MSAD Insurance. But when comparing it to its historical volatility, Amazon Inc is 2.08 times less risky than MSAD Insurance. It trades about 0.04 of its potential returns per unit of risk. MSAD Insurance Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,764  in MSAD Insurance Group on March 7, 2024 and sell it today you would earn a total of  385.00  from holding MSAD Insurance Group or generate 21.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Amazon Inc  vs.  MSAD Insurance Group

Amazon Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

MSAD Insurance Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSAD Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, MSAD Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and MSAD Insurance

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

The idea behind Amazon Inc and MSAD Insurance Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.