Correlation Between American Express and Healthcare

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

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

Diversification Opportunities for American Express and Healthcare

-0.52

Correlation Coefficient

American Express  Healthcare

Excellent diversification

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

Pair Corralation between American Express and Healthcare

Considering the 90-day investment horizon American Express is expected to generate 10.42 times less return on investment than Healthcare. But when comparing it to its historical volatility, American Express is 17.33 times less risky than Healthcare. It trades about 0.18 of its potential returns per unit of risk. Healthcare AI Acquisition is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Healthcare AI Acquisition on September 5, 2024 and sell it today you would lose (0.27) from holding Healthcare AI Acquisition or give up 10.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	47.62%
Values	Daily Returns

American Express  vs.  Healthcare AI Acquisition

American Express

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 14 (%) 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.

Healthcare AI Acquisition

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Healthcare AI Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Healthcare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Healthcare

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

The idea behind American Express and Healthcare AI Acquisition 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.