Correlation Between American Express and ACST Old

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

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

Diversification Opportunities for American Express and ACST Old

0.63

Correlation Coefficient

American Express  ACST Old

Poor diversification

The 3 months correlation between American and ACST is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ACST Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACST Old 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 ACST Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACST Old has no effect on the direction of American Express i.e., American Express and ACST Old go up and down completely randomly.

Pair Corralation between American Express and ACST Old

Considering the 90-day investment horizon American Express is expected to generate 0.36 times more return on investment than ACST Old. However, American Express is 2.82 times less risky than ACST Old. It trades about 0.1 of its potential returns per unit of risk. ACST Old is currently generating about 0.0 per unit of risk. If you would invest  14,316  in American Express on October 10, 2024 and sell it today you would earn a total of  15,886  from holding American Express or generate 110.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.3%
Values	Daily Returns

American Express  vs.  ACST Old

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. Even with relatively abnormal basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ACST Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACST Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ACST Old is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Express and ACST Old

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

The idea behind American Express and ACST Old 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.