Correlation Between American Express and Assa Abloy

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

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

Diversification Opportunities for American Express and Assa Abloy

-0.45

Correlation Coefficient

American Express  Assa Abloy

Very good diversification

The 3 months correlation between American and Assa is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Assa Abloy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assa Abloy AB 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 Assa Abloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assa Abloy AB has no effect on the direction of American Express i.e., American Express and Assa Abloy go up and down completely randomly.

Pair Corralation between American Express and Assa Abloy

Considering the 90-day investment horizon American Express is expected to under-perform the Assa Abloy. In addition to that, American Express is 1.03 times more volatile than Assa Abloy AB. It trades about -0.07 of its total potential returns per unit of risk. Assa Abloy AB is currently generating about 0.02 per unit of volatility. If you would invest  1,486  in Assa Abloy AB on December 26, 2024 and sell it today you would earn a total of  21.00  from holding Assa Abloy AB or generate 1.41% return on investment over 90 days.

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

American Express  vs.  Assa Abloy AB

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Assa Abloy AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Assa Abloy AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Assa Abloy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and Assa Abloy

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

The idea behind American Express and Assa Abloy AB 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.