Correlation Between American Express and STF Tactical

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

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

Diversification Opportunities for American Express and STF Tactical

0.9

Correlation Coefficient

American Express  STF Tactical

Almost no diversification

The 3 months correlation between American and STF is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Express and STF Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STF Tactical Growth 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 STF Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STF Tactical Growth has no effect on the direction of American Express i.e., American Express and STF Tactical go up and down completely randomly.

Pair Corralation between American Express and STF Tactical

Considering the 90-day investment horizon American Express is expected to generate 1.63 times more return on investment than STF Tactical. However, American Express is 1.63 times more volatile than STF Tactical Growth. It trades about 0.16 of its potential returns per unit of risk. STF Tactical Growth is currently generating about 0.11 per unit of risk. If you would invest  16,191  in American Express on September 14, 2024 and sell it today you would earn a total of  14,027  from holding American Express or generate 86.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

American Express  vs.  STF Tactical Growth

American Express

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 12 (%) 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.

STF Tactical Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, STF Tactical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and STF Tactical

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

The idea behind American Express and STF Tactical Growth 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.