Correlation Between American Express and All American
Can any of the company-specific risk be diversified away by investing in both American Express and All American 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 All American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and All American Gld, you can compare the effects of market volatilities on American Express and All American 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 All American. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and All American.
Diversification Opportunities for American Express and All American
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and All is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Express and All American Gld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Gld 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 All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Gld has no effect on the direction of American Express i.e., American Express and All American go up and down completely randomly.
Pair Corralation between American Express and All American
Considering the 90-day investment horizon American Express is expected to under-perform the All American. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 6.22 times less risky than All American. The stock trades about -0.09 of its potential returns per unit of risk. The All American Gld is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 0.13 in All American Gld on December 27, 2024 and sell it today you would lose (0.04) from holding All American Gld or give up 30.77% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.36% |
Values | Daily Returns |
American Express vs. All American Gld
Performance |
Timeline |
American Express |
All American Gld |
American Express and All American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and All American
The main advantage of trading using opposite American Express and All American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, All American 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 All American will offset losses from the drop in All American's long position.American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart Holdings |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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