Correlation Between Apple and American Express

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

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

Diversification Opportunities for Apple and American Express

0.1

Correlation Coefficient

Apple  American Express

Average diversification

The 3 months correlation between Apple and American is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc DRC and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Apple 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 Apple Inc DRC are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Apple i.e., Apple and American Express go up and down completely randomly.

Pair Corralation between Apple and American Express

Assuming the 90 days trading horizon Apple Inc DRC is expected to under-perform the American Express. In addition to that, Apple is 1.04 times more volatile than American Express Co. It trades about -0.03 of its total potential returns per unit of risk. American Express Co is currently generating about -0.01 per unit of volatility. If you would invest  2,359,995  in American Express Co on December 30, 2024 and sell it today you would lose (44,995) from holding American Express Co or give up 1.91% of portfolio value over 90 days.

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

Apple Inc DRC  vs.  American Express Co

Apple Inc DRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Apple is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apple and American Express

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

The idea behind Apple Inc DRC and American Express Co 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 Stocks Directory module to find actively traded stocks across global markets.