Correlation Between American Express and Trustfeed Corp

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

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

Diversification Opportunities for American Express and Trustfeed Corp

-0.77

Correlation Coefficient

American Express  Trustfeed Corp

Pay attention - limited upside

The 3 months correlation between American and Trustfeed is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Trustfeed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trustfeed 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 Trustfeed Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trustfeed Corp has no effect on the direction of American Express i.e., American Express and Trustfeed Corp go up and down completely randomly.

Pair Corralation between American Express and Trustfeed Corp

Considering the 90-day investment horizon American Express is expected to generate 8.78 times less return on investment than Trustfeed Corp. But when comparing it to its historical volatility, American Express is 15.75 times less risky than Trustfeed Corp. It trades about 0.1 of its potential returns per unit of risk. Trustfeed Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,290  in Trustfeed Corp on September 14, 2024 and sell it today you would lose (1,265) from holding Trustfeed Corp or give up 98.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

American Express  vs.  Trustfeed Corp

American Express

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Trustfeed Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trustfeed Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent technical and fundamental indicators, Trustfeed Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Trustfeed Corp

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

The idea behind American Express and Trustfeed 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.