Correlation Between American Express and Labrador Iron
Can any of the company-specific risk be diversified away by investing in both American Express and Labrador Iron 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 Labrador Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Labrador Iron Ore, you can compare the effects of market volatilities on American Express and Labrador Iron 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 Labrador Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Labrador Iron.
Diversification Opportunities for American Express and Labrador Iron
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Labrador is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore 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 Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of American Express i.e., American Express and Labrador Iron go up and down completely randomly.
Pair Corralation between American Express and Labrador Iron
Considering the 90-day investment horizon American Express is expected to generate 1.25 times more return on investment than Labrador Iron. However, American Express is 1.25 times more volatile than Labrador Iron Ore. It trades about 0.01 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.15 per unit of risk. If you would invest 30,328 in American Express on October 7, 2024 and sell it today you would lose (20.00) from holding American Express or give up 0.07% 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. Labrador Iron Ore
Performance |
Timeline |
American Express |
Labrador Iron Ore |
American Express and Labrador Iron Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and Labrador Iron
The main advantage of trading using opposite American Express and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Labrador Iron 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 Labrador Iron will offset losses from the drop in Labrador Iron's long position.American Express vs. Visa Class A | American Express vs. Aquagold International | American Express vs. Alibaba Group Holding | American Express vs. Banco Bradesco SA |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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