Correlation Between Amazon and Vornado Realty

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

Diversification Opportunities for Amazon and Vornado Realty

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Amazon and Vornado is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust 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 Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of Amazon i.e., Amazon and Vornado Realty go up and down completely randomly.

Pair Corralation between Amazon and Vornado Realty

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Vornado Realty. In addition to that, Amazon is 1.12 times more volatile than Vornado Realty Trust. It trades about -0.03 of its total potential returns per unit of risk. Vornado Realty Trust is currently generating about -0.02 per unit of volatility. If you would invest  3,442  in Vornado Realty Trust on September 2, 2022 and sell it today you would lose (964.00)  from holding Vornado Realty Trust or give up 28.01% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Vornado Realty Trust

 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

Vornado Realty Trust 
Vornado Performance
0 of 100
Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Vornado Realty is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Vornado Price Channel

Amazon and Vornado Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Vornado Realty

The main advantage of trading using opposite Amazon and Vornado Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Vornado Realty 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 Vornado Realty will offset losses from the drop in Vornado Realty's long position.
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The idea behind Amazon Inc and Vornado Realty Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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