Correlation Between Amazon and Vanguard World

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

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

Diversification Opportunities for Amazon and Vanguard World

0.48

Correlation Coefficient

Amazon  Vanguard World

Very weak diversification

The 3 months correlation between Amazon and Vanguard is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World 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 Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Amazon i.e., Amazon and Vanguard World go up and down completely randomly.

Pair Corralation between Amazon and Vanguard World

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.84 times more return on investment than Vanguard World. However, Amazon Inc is 1.19 times less risky than Vanguard World. It trades about 0.37 of its potential returns per unit of risk. Vanguard World is currently generating about 0.25 per unit of risk. If you would invest  17,834  in Amazon Inc on April 4, 2024 and sell it today you would earn a total of  2,166  from holding Amazon Inc or generate 12.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Amazon Inc  vs.  Vanguard World

Amazon Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in August 2024.

Vanguard World

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard World are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard World may actually be approaching a critical reversion point that can send shares even higher in August 2024.

Pair Trading with Amazon and Vanguard World

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

The idea behind Amazon Inc and Vanguard World 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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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.