Correlation Between American Express and DHACW Old

Can any of the company-specific risk be diversified away by investing in both American Express and DHACW 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 DHACW 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 DHACW Old, you can compare the effects of market volatilities on American Express and DHACW 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 DHACW Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and DHACW Old.

Diversification Opportunities for American Express and DHACW Old

0.0

Correlation Coefficient

American Express  DHACW Old

Pay attention - limited upside

The 3 months correlation between American and DHACW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Express and DHACW Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHACW 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 DHACW Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHACW Old has no effect on the direction of American Express i.e., American Express and DHACW Old go up and down completely randomly.

Pair Corralation between American Express and DHACW Old

If you would invest  26,672  in American Express on October 25, 2024 and sell it today you would earn a total of  5,553  from holding American Express or generate 20.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

American Express  vs.  DHACW Old

American Express

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

DHACW Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHACW Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, DHACW Old is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with American Express and DHACW Old

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

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