Correlation Between American Express and Columbia Mid

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

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

Diversification Opportunities for American Express and Columbia Mid

0.82

Correlation Coefficient

American Express  Columbia Mid

Very poor diversification

The 3 months correlation between American and Columbia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Columbia Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Mid Cap 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 Columbia Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Mid Cap has no effect on the direction of American Express i.e., American Express and Columbia Mid go up and down completely randomly.

Pair Corralation between American Express and Columbia Mid

Considering the 90-day investment horizon American Express is expected to generate 1.96 times less return on investment than Columbia Mid. In addition to that, American Express is 1.18 times more volatile than Columbia Mid Cap. It trades about 0.18 of its total potential returns per unit of risk. Columbia Mid Cap is currently generating about 0.41 per unit of volatility. If you would invest  3,077  in Columbia Mid Cap on October 27, 2024 and sell it today you would earn a total of  415.00  from holding Columbia Mid Cap or generate 13.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	36.67%
Values	Daily Returns

American Express  vs.  Columbia Mid Cap

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. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Columbia Mid Cap

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Columbia Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Columbia Mid

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

The idea behind American Express and Columbia Mid Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..