Correlation Between American Express and ProShares Short

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

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

Diversification Opportunities for American Express and ProShares Short

0.31

Correlation Coefficient

American Express  ProShares Short

Weak diversification

The 3 months correlation between American and ProShares is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ProShares Short VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short VIX 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short VIX has no effect on the direction of American Express i.e., American Express and ProShares Short go up and down completely randomly.

Pair Corralation between American Express and ProShares Short

Considering the 90-day investment horizon American Express is expected to generate 0.67 times more return on investment than ProShares Short. However, American Express is 1.49 times less risky than ProShares Short. It trades about -0.06 of its potential returns per unit of risk. ProShares Short VIX is currently generating about -0.08 per unit of risk. If you would invest  30,189  in American Express on December 4, 2024 and sell it today you would lose (1,842) from holding American Express or give up 6.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Express  vs.  ProShares Short VIX

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.

ProShares Short VIX

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short VIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with American Express and ProShares Short

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

The idea behind American Express and ProShares Short VIX 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.