Correlation Between American Express and RIWI Corp

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

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

Diversification Opportunities for American Express and RIWI Corp

0.7

Correlation Coefficient

American Express  RIWI Corp

Poor diversification

The 3 months correlation between American and RIWI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Express and RIWI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIWI Corp 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 RIWI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIWI Corp has no effect on the direction of American Express i.e., American Express and RIWI Corp go up and down completely randomly.

Pair Corralation between American Express and RIWI Corp

Considering the 90-day investment horizon American Express is expected to generate 0.32 times more return on investment than RIWI Corp. However, American Express is 3.17 times less risky than RIWI Corp. It trades about -0.08 of its potential returns per unit of risk. RIWI Corp is currently generating about -0.06 per unit of risk. If you would invest  29,663  in American Express on December 29, 2024 and sell it today you would lose (2,461) from holding American Express or give up 8.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

American Express  vs.  RIWI Corp

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 latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

RIWI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days RIWI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Express and RIWI Corp

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

The idea behind American Express and RIWI Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.