Correlation Between American Express and Charlottes Web

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

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

Diversification Opportunities for American Express and Charlottes Web

0.52

Correlation Coefficient

American Express  Charlottes Web

Very weak diversification

The 3 months correlation between American and Charlottes is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Charlottes Web Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charlottes Web Holdings 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 Charlottes Web. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charlottes Web Holdings has no effect on the direction of American Express i.e., American Express and Charlottes Web go up and down completely randomly.

Pair Corralation between American Express and Charlottes Web

Considering the 90-day investment horizon American Express is expected to under-perform the Charlottes Web. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 3.59 times less risky than Charlottes Web. The stock trades about -0.1 of its potential returns per unit of risk. The Charlottes Web Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9.40  in Charlottes Web Holdings on December 31, 2024 and sell it today you would lose (0.10) from holding Charlottes Web Holdings or give up 1.06% of portfolio value over 90 days.

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

American Express  vs.  Charlottes Web Holdings

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.

Charlottes Web Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charlottes Web Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Charlottes Web may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with American Express and Charlottes Web

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

The idea behind American Express and Charlottes Web Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.