Correlation Between American Express and Rightscorp

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

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

Diversification Opportunities for American Express and Rightscorp

0.47

Correlation Coefficient

American Express  Rightscorp

Very weak diversification

The 3 months correlation between American and Rightscorp is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Rightscorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rightscorp 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 Rightscorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rightscorp has no effect on the direction of American Express i.e., American Express and Rightscorp go up and down completely randomly.

Pair Corralation between American Express and Rightscorp

Considering the 90-day investment horizon American Express is expected to under-perform the Rightscorp. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 6.84 times less risky than Rightscorp. The stock trades about -0.34 of its potential returns per unit of risk. The Rightscorp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2.09  in Rightscorp on December 4, 2024 and sell it today you would lose (0.39) from holding Rightscorp or give up 18.66% of portfolio value over 90 days.

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

American Express  vs.  Rightscorp

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, American Express is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Rightscorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rightscorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Rightscorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Rightscorp

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

The idea behind American Express and Rightscorp 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .