Correlation Between American Express and London Security

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

By analyzing existing cross correlation between American Express Co and London Security Plc, you can compare the effects of market volatilities on American Express and London Security 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 American Express with a short position of London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and London Security.

Diversification Opportunities for American Express and London Security

-0.89

Correlation Coefficient

American Express  London Security

Pay attention - limited upside

The 3 months correlation between American and London is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc and American Express 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 American Express Co are associated (or correlated) with London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of American Express i.e., American Express and London Security go up and down completely randomly.

Pair Corralation between American Express and London Security

If you would invest  340,000  in London Security Plc on October 11, 2024 and sell it today you would earn a total of  0.00  from holding London Security Plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

American Express Co  vs.  London Security Plc

American Express

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in February 2025.

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with American Express and London Security

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

The idea behind American Express Co and London Security Plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.