Correlation Between American Express and Revance

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

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

Diversification Opportunities for American Express and Revance

-0.32

Correlation Coefficient

American Express  Revance

Very good diversification

The 3 months correlation between American and Revance is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Revance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revance 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 Revance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revance has no effect on the direction of American Express i.e., American Express and Revance go up and down completely randomly.

Pair Corralation between American Express and Revance

Considering the 90-day investment horizon American Express is expected to generate 7.75 times less return on investment than Revance. But when comparing it to its historical volatility, American Express is 3.09 times less risky than Revance. It trades about 0.0 of its potential returns per unit of risk. Revance is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  373.00  in Revance on December 1, 2024 and sell it today you would lose (8.00) from holding Revance or give up 2.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.67%
Values	Daily Returns

American Express  vs.  Revance

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.

Revance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Revance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Revance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Express and Revance

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

The idea behind American Express and Revance 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.