Correlation Between American Express and Hop On

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

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

Diversification Opportunities for American Express and Hop On

0.64

Correlation Coefficient

American Express  Hop On

Poor diversification

The 3 months correlation between American and Hop is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Hop On Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hop On Inc 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 Hop On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hop On Inc has no effect on the direction of American Express i.e., American Express and Hop On go up and down completely randomly.

Pair Corralation between American Express and Hop On

Considering the 90-day investment horizon American Express is expected to generate 5.77 times less return on investment than Hop On. But when comparing it to its historical volatility, American Express is 9.82 times less risky than Hop On. It trades about 0.18 of its potential returns per unit of risk. Hop On Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Hop On Inc on September 5, 2024 and sell it today you would earn a total of  0.02  from holding Hop On Inc or generate 40.0% return on investment over 90 days.

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

American Express  vs.  Hop On Inc

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.

Hop On Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hop On Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Hop On displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Hop On

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

The idea behind American Express and Hop On Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.