Correlation Between American Express and URU Metals
Can any of the company-specific risk be diversified away by investing in both American Express and URU Metals 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 URU Metals 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 URU Metals, you can compare the effects of market volatilities on American Express and URU Metals 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 URU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and URU Metals.
Diversification Opportunities for American Express and URU Metals
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and URU is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU Metals 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 URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of American Express i.e., American Express and URU Metals go up and down completely randomly.
Pair Corralation between American Express and URU Metals
Assuming the 90 days trading horizon American Express Co is expected to generate 0.6 times more return on investment than URU Metals. However, American Express Co is 1.66 times less risky than URU Metals. It trades about 0.22 of its potential returns per unit of risk. URU Metals is currently generating about 0.01 per unit of risk. If you would invest 29,677 in American Express Co on October 22, 2024 and sell it today you would earn a total of 1,593 from holding American Express Co or generate 5.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
American Express Co vs. URU Metals
Performance |
Timeline |
American Express |
URU Metals |
American Express and URU Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and URU Metals
The main advantage of trading using opposite American Express and URU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, URU Metals 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 URU Metals will offset losses from the drop in URU Metals' long position.American Express vs. STMicroelectronics NV | ||
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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 the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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