Correlation Between American Express and VanEck Natural

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

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

Diversification Opportunities for American Express and VanEck Natural

-0.66

Correlation Coefficient

American Express  VanEck Natural

Excellent diversification

The 3 months correlation between American and VanEck is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Express and VanEck Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Natural Resources 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 VanEck Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Natural Resources has no effect on the direction of American Express i.e., American Express and VanEck Natural go up and down completely randomly.

Pair Corralation between American Express and VanEck Natural

Considering the 90-day investment horizon American Express is expected to generate 1.46 times more return on investment than VanEck Natural. However, American Express is 1.46 times more volatile than VanEck Natural Resources. It trades about 0.23 of its potential returns per unit of risk. VanEck Natural Resources is currently generating about -0.26 per unit of risk. If you would invest  28,554  in American Express on September 19, 2024 and sell it today you would earn a total of  1,580  from holding American Express or generate 5.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

American Express  vs.  VanEck Natural Resources

American Express

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 10 (%) 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.

VanEck Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with American Express and VanEck Natural

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

The idea behind American Express and VanEck Natural Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.