Correlation Between American Express and SAITW Old

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

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

Diversification Opportunities for American Express and SAITW Old

-0.53

Correlation Coefficient

American Express  SAITW Old

Excellent diversification

The 3 months correlation between American and SAITW is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Express and SAITW Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAITW Old 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 SAITW Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAITW Old has no effect on the direction of American Express i.e., American Express and SAITW Old go up and down completely randomly.

Pair Corralation between American Express and SAITW Old

Considering the 90-day investment horizon American Express is expected to generate 226.63 times less return on investment than SAITW Old. But when comparing it to its historical volatility, American Express is 118.59 times less risky than SAITW Old. It trades about 0.09 of its potential returns per unit of risk. SAITW Old is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8.08  in SAITW Old on October 10, 2024 and sell it today you would lose (8.08) from holding SAITW Old or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.93%
Values	Daily Returns

American Express  vs.  SAITW Old

American Express

Risk-Adjusted Performance

9 of 100

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 February 2025.

SAITW Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAITW Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SAITW Old is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with American Express and SAITW Old

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

The idea behind American Express and SAITW Old 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.