Correlation Between American Express and 88 Energy

Can any of the company-specific risk be diversified away by investing in both American Express and 88 Energy 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 88 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and 88 Energy Limited, you can compare the effects of market volatilities on American Express and 88 Energy 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 88 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and 88 Energy.

Diversification Opportunities for American Express and 88 Energy

0.56

Correlation Coefficient

American Express  88 Energy

Very weak diversification

The 3 months correlation between American and EEENF is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Express and 88 Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 88 Energy Limited 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 88 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 88 Energy Limited has no effect on the direction of American Express i.e., American Express and 88 Energy go up and down completely randomly.

Pair Corralation between American Express and 88 Energy

Considering the 90-day investment horizon American Express is expected to under-perform the 88 Energy. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 4.71 times less risky than 88 Energy. The stock trades about -0.09 of its potential returns per unit of risk. The 88 Energy Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.10  in 88 Energy Limited on December 27, 2024 and sell it today you would earn a total of  0.00  from holding 88 Energy Limited or generate 0.0% return on investment over 90 days.

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

American Express  vs.  88 Energy Limited

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.

88 Energy Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 88 Energy Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 88 Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and 88 Energy

The main advantage of trading using opposite American Express and 88 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, 88 Energy 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 88 Energy will offset losses from the drop in 88 Energy's long position.

The idea behind American Express and 88 Energy Limited 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.