Correlation Between American Express and One Step

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

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

Diversification Opportunities for American Express and One Step

-0.64

Correlation Coefficient

American Express  One Step

Excellent diversification

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

Pair Corralation between American Express and One Step

Considering the 90-day investment horizon American Express is expected to generate 4.86 times less return on investment than One Step. But when comparing it to its historical volatility, American Express is 13.72 times less risky than One Step. It trades about 0.16 of its potential returns per unit of risk. One Step Vending is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.48  in One Step Vending on September 15, 2024 and sell it today you would lose (0.22) from holding One Step Vending or give up 45.83% of portfolio value over 90 days.

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

American Express  vs.  One Step Vending

American Express

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

One Step Vending

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in One Step Vending are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, One Step disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and One Step

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

The idea behind American Express and One Step Vending 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.