Correlation Between American Express and Fidelity Low

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

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

Diversification Opportunities for American Express and Fidelity Low

0.89

Correlation Coefficient

American Express  Fidelity Low

Very poor diversification

The 3 months correlation between American and Fidelity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Fidelity Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Duration 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 Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Duration has no effect on the direction of American Express i.e., American Express and Fidelity Low go up and down completely randomly.

Pair Corralation between American Express and Fidelity Low

Considering the 90-day investment horizon American Express is expected to generate 13.15 times more return on investment than Fidelity Low. However, American Express is 13.15 times more volatile than Fidelity Low Duration. It trades about 0.16 of its potential returns per unit of risk. Fidelity Low Duration is currently generating about 0.13 per unit of risk. If you would invest  26,041  in American Express on September 16, 2024 and sell it today you would earn a total of  4,173  from holding American Express or generate 16.02% return on investment over 90 days.

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

American Express  vs.  Fidelity Low Duration

American Express

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 12 (%) 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.

Fidelity Low Duration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Duration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Fidelity Low is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and Fidelity Low

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

The idea behind American Express and Fidelity Low Duration 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.