Correlation Between American Express and Plum Acquisition

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Can any of the company-specific risk be diversified away by investing in both American Express and Plum Acquisition 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 Plum Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Plum Acquisition I, you can compare the effects of market volatilities on American Express and Plum Acquisition 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 Plum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Plum Acquisition.

Diversification Opportunities for American Express and Plum Acquisition

AmericanPlumDiversified AwayAmericanPlumDiversified Away100%
-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between American and Plum is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Plum Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition I 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition I has no effect on the direction of American Express i.e., American Express and Plum Acquisition go up and down completely randomly.

Pair Corralation between American Express and Plum Acquisition

If you would invest  26,552  in American Express on September 24, 2024 and sell it today you would earn a total of  3,235  from holding American Express or generate 12.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy1.54%
ValuesDaily Returns

American Express  vs.  Plum Acquisition I

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-10010
JavaScript chart by amCharts 3.21.15AXP PLMIU
       Timeline  
American Express 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 9 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec265270275280285290295300305
Plum Acquisition I 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Plum Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Plum Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

American Express and Plum Acquisition Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.03-3.77-2.51-1.24-0.02111.312.653.995.32 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15AXP PLMIU
       Returns  

Pair Trading with American Express and Plum Acquisition

The main advantage of trading using opposite American Express and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Plum Acquisition 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 Plum Acquisition will offset losses from the drop in Plum Acquisition's long position.
The idea behind American Express and Plum Acquisition I 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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