Correlation Between American Express and OneMain Holdings

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

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

Diversification Opportunities for American Express and OneMain Holdings

0.87

Correlation Coefficient

American Express  OneMain Holdings

Very poor diversification

The 3 months correlation between American and OneMain is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Express and OneMain Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneMain Holdings 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 OneMain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneMain Holdings has no effect on the direction of American Express i.e., American Express and OneMain Holdings go up and down completely randomly.

Pair Corralation between American Express and OneMain Holdings

Considering the 90-day investment horizon American Express is expected to generate 0.74 times more return on investment than OneMain Holdings. However, American Express is 1.35 times less risky than OneMain Holdings. It trades about 0.14 of its potential returns per unit of risk. OneMain Holdings is currently generating about 0.03 per unit of risk. If you would invest  18,376  in American Express on September 20, 2024 and sell it today you would earn a total of  11,758  from holding American Express or generate 63.99% return on investment over 90 days.

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

American Express  vs.  OneMain Holdings

American Express

Risk-Adjusted Performance

10 of 100

Modest

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.

OneMain Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OneMain Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting primary indicators, OneMain Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Express and OneMain Holdings

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

The idea behind American Express and OneMain Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.