Correlation Between American Express and FIBRA Storage

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

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

Diversification Opportunities for American Express and FIBRA Storage

0.79

Correlation Coefficient

American Express  FIBRA Storage

Poor diversification

The 3 months correlation between American and FIBRA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Express and FIBRA Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Storage 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 FIBRA Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Storage has no effect on the direction of American Express i.e., American Express and FIBRA Storage go up and down completely randomly.

Pair Corralation between American Express and FIBRA Storage

Assuming the 90 days trading horizon American Express is expected to generate 2.68 times more return on investment than FIBRA Storage. However, American Express is 2.68 times more volatile than FIBRA Storage. It trades about 0.17 of its potential returns per unit of risk. FIBRA Storage is currently generating about 0.13 per unit of risk. If you would invest  538,736  in American Express on October 21, 2024 and sell it today you would earn a total of  110,064  from holding American Express or generate 20.43% return on investment over 90 days.

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

American Express  vs.  FIBRA Storage

American Express

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 13 (%) 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.

FIBRA Storage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FIBRA Storage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Express and FIBRA Storage

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

The idea behind American Express and FIBRA Storage 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.