Correlation Between American Express and Exchange Traded

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

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

Diversification Opportunities for American Express and Exchange Traded

0.66

Correlation Coefficient

American Express  Exchange Traded

Poor diversification

The 3 months correlation between American and Exchange is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of American Express i.e., American Express and Exchange Traded go up and down completely randomly.

Pair Corralation between American Express and Exchange Traded

If you would invest  25,118  in American Express on September 5, 2024 and sell it today you would earn a total of  5,093  from holding American Express or generate 20.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

American Express  vs.  Exchange Traded Concepts

American Express

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Exchange Traded Concepts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Exchange Traded is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and Exchange Traded

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

The idea behind American Express and Exchange Traded Concepts 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.