Correlation Between American Express and Solvay Bank

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

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

Diversification Opportunities for American Express and Solvay Bank

-0.21

Correlation Coefficient

American Express  Solvay Bank

Very good diversification

The 3 months correlation between American and Solvay is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Solvay Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay Bank 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 Solvay Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay Bank Corp has no effect on the direction of American Express i.e., American Express and Solvay Bank go up and down completely randomly.

Pair Corralation between American Express and Solvay Bank

Considering the 90-day investment horizon American Express is expected to under-perform the Solvay Bank. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 1.16 times less risky than Solvay Bank. The stock trades about -0.35 of its potential returns per unit of risk. The Solvay Bank Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,675  in Solvay Bank Corp on December 4, 2024 and sell it today you would earn a total of  25.00  from holding Solvay Bank Corp or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

American Express  vs.  Solvay Bank 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 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.

Solvay Bank Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solvay Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Solvay Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Express and Solvay Bank

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

The idea behind American Express and Solvay Bank 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.