Correlation Between American Express and Gentera SAB

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

By analyzing existing cross correlation between American Express and Gentera SAB de, you can compare the effects of market volatilities on American Express and Gentera SAB 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 Gentera SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Gentera SAB.

Diversification Opportunities for American Express and Gentera SAB

0.42

Correlation Coefficient

American Express  Gentera SAB

Very weak diversification

The 3 months correlation between American and Gentera is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Gentera SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentera SAB de 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 are associated (or correlated) with Gentera SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentera SAB de has no effect on the direction of American Express i.e., American Express and Gentera SAB go up and down completely randomly.

Pair Corralation between American Express and Gentera SAB

Assuming the 90 days trading horizon American Express is expected to generate 0.74 times more return on investment than Gentera SAB. However, American Express is 1.35 times less risky than Gentera SAB. It trades about 0.1 of its potential returns per unit of risk. Gentera SAB de is currently generating about 0.03 per unit of risk. If you would invest  282,096  in American Express on October 12, 2024 and sell it today you would earn a total of  327,639  from holding American Express or generate 116.14% return on investment over 90 days.

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

American Express  vs.  Gentera SAB de

American Express

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, American Express showed solid returns over the last few months and may actually be approaching a breakup point.

Gentera SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Express and Gentera SAB

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

The idea behind American Express and Gentera SAB de 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.