Correlation Between American Express and Sharing Services

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

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

Diversification Opportunities for American Express and Sharing Services

0.71

Correlation Coefficient

American Express  Sharing Services

Poor diversification

The 3 months correlation between American and Sharing is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Sharing Services Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharing Services Global 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 Sharing Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharing Services Global has no effect on the direction of American Express i.e., American Express and Sharing Services go up and down completely randomly.

Pair Corralation between American Express and Sharing Services

Considering the 90-day investment horizon American Express is expected to generate 0.08 times more return on investment than Sharing Services. However, American Express is 12.53 times less risky than Sharing Services. It trades about -0.31 of its potential returns per unit of risk. Sharing Services Global is currently generating about -0.25 per unit of risk. If you would invest  31,704  in American Express on November 29, 2024 and sell it today you would lose (2,284) from holding American Express or give up 7.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

American Express  vs.  Sharing Services Global

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.

Sharing Services Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sharing Services Global are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sharing Services reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Sharing Services

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

The idea behind American Express and Sharing Services Global 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.