Correlation Between Amazon and US Bancorp

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Can any of the company-specific risk be diversified away by investing in both Amazon and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and US Bancorp, you can compare the effects of market volatilities on Amazon and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and US Bancorp.

Diversification Opportunities for Amazon and US Bancorp

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Amazon and US Bancorp is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Amazon i.e., Amazon and US Bancorp go up and down completely randomly.

Pair Corralation between Amazon and US Bancorp

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the US Bancorp. In addition to that, Amazon is 1.72 times more volatile than US Bancorp. It trades about -0.11 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.11 per unit of volatility. If you would invest  4,157  in US Bancorp on September 2, 2022 and sell it today you would earn a total of  378.00  from holding US Bancorp or generate 9.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  US Bancorp

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

US Bancorp 
US Bancorp Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, US Bancorp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

US Bancorp Price Channel

Amazon and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and US Bancorp

The main advantage of trading using opposite Amazon and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
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The idea behind Amazon Inc and US Bancorp 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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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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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