Correlation Between American Express and IShares MSCI

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

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

Diversification Opportunities for American Express and IShares MSCI

0.94

Correlation Coefficient

American Express  IShares MSCI

Almost no diversification

The 3 months correlation between American and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Express and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of American Express i.e., American Express and IShares MSCI go up and down completely randomly.

Pair Corralation between American Express and IShares MSCI

Considering the 90-day investment horizon American Express is expected to generate 2.1 times more return on investment than IShares MSCI. However, American Express is 2.1 times more volatile than iShares MSCI USA. It trades about 0.11 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.0 per unit of risk. If you would invest  27,074  in American Express on September 21, 2024 and sell it today you would earn a total of  2,234  from holding American Express or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.73%
Values	Daily Returns

American Express  vs.  iShares MSCI USA

American Express

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 7 (%) 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.

iShares MSCI USA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Express and IShares MSCI

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

The idea behind American Express and iShares MSCI USA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.