Correlation Between American Express and Zhong Yang

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

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

Diversification Opportunities for American Express and Zhong Yang

-0.67

Correlation Coefficient

American Express  Zhong Yang

Excellent diversification

The 3 months correlation between American and Zhong is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Zhong Yang Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhong Yang Financial 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 Zhong Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhong Yang Financial has no effect on the direction of American Express i.e., American Express and Zhong Yang go up and down completely randomly.

Pair Corralation between American Express and Zhong Yang

Considering the 90-day investment horizon American Express is expected to generate 0.37 times more return on investment than Zhong Yang. However, American Express is 2.71 times less risky than Zhong Yang. It trades about 0.08 of its potential returns per unit of risk. Zhong Yang Financial is currently generating about -0.01 per unit of risk. If you would invest  29,602  in American Express on October 9, 2024 and sell it today you would earn a total of  586.00  from holding American Express or generate 1.98% return on investment over 90 days.

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

American Express  vs.  Zhong Yang Financial

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.

Zhong Yang Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhong Yang Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with American Express and Zhong Yang

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

The idea behind American Express and Zhong Yang Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.