AMZY: A Conservative Income Strategy On Amazon That Produces Alpha

2025-03-09 14:07:59 ET

Summary

• Hedge AMZY by shorting AMZN, achieving an annualized return of 8.5% with a max drawdown of 3.9% and a Sharpe ratio of 1.39.
• Return dependency on AMZN's price and volatility, mitigated by rebalancing after crashes.
• The strategy offers high returns with low risk, ideal for conservative and income investors amid an expensive market.

Introduction

For income investors, it is often hard to find new, low risk, strategies or assets with a decent yield to further diversify their portfolio. Even conservative stocks can fall by 40% in big crashes. The same goes for long term bonds if the crash is caused by interest rate hikes. Furthermore, treasury bills that have very low volatility might not keep their current high yield if interest rates drop even more....

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