Correlation Between American Express and Green Dot

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

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

Diversification Opportunities for American Express and Green Dot

-0.57

Correlation Coefficient

American Express  Green Dot

Excellent diversification

The 3 months correlation between American and Green is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Green Dot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Dot 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 Green Dot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Dot has no effect on the direction of American Express i.e., American Express and Green Dot go up and down completely randomly.

Pair Corralation between American Express and Green Dot

Considering the 90-day investment horizon American Express is expected to generate 0.49 times more return on investment than Green Dot. However, American Express is 2.05 times less risky than Green Dot. It trades about 0.1 of its potential returns per unit of risk. Green Dot is currently generating about 0.0 per unit of risk. If you would invest  14,346  in American Express on September 19, 2024 and sell it today you would earn a total of  14,432  from holding American Express or generate 100.6% return on investment over 90 days.

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

American Express  vs.  Green Dot

American Express

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Green Dot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Dot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with American Express and Green Dot

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

The idea behind American Express and Green Dot 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.