Correlation Between American Express and Arrowroot Acquisition

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

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

Diversification Opportunities for American Express and Arrowroot Acquisition

0.88

Correlation Coefficient

American Express  Arrowroot Acquisition

Very poor diversification

The 3 months correlation between American and Arrowroot is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Arrowroot Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowroot Acquisition 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 Arrowroot Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowroot Acquisition has no effect on the direction of American Express i.e., American Express and Arrowroot Acquisition go up and down completely randomly.

Pair Corralation between American Express and Arrowroot Acquisition

If you would invest  27,049  in American Express on September 30, 2024 and sell it today you would earn a total of  3,056  from holding American Express or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

American Express  vs.  Arrowroot Acquisition Corp

American Express

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 8 (%) 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 January 2025.

Arrowroot Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Express and Arrowroot Acquisition

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

The idea behind American Express and Arrowroot Acquisition Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.