Correlation Between American Express and 02005NBJ8

Can any of the company-specific risk be diversified away by investing in both American Express and 02005NBJ8 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 02005NBJ8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and ALLY FINANCIAL INC, you can compare the effects of market volatilities on American Express and 02005NBJ8 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 02005NBJ8. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and 02005NBJ8.

Diversification Opportunities for American Express and 02005NBJ8

-0.51

Correlation Coefficient

American Express  02005NBJ8

Excellent diversification

The 3 months correlation between American and 02005NBJ8 is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ALLY FINANCIAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLY FINANCIAL INC 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 02005NBJ8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLY FINANCIAL INC has no effect on the direction of American Express i.e., American Express and 02005NBJ8 go up and down completely randomly.

Pair Corralation between American Express and 02005NBJ8

Considering the 90-day investment horizon American Express is expected to under-perform the 02005NBJ8. In addition to that, American Express is 11.61 times more volatile than ALLY FINANCIAL INC. It trades about -0.04 of its total potential returns per unit of risk. ALLY FINANCIAL INC is currently generating about 0.05 per unit of volatility. If you would invest  10,036  in ALLY FINANCIAL INC on October 5, 2024 and sell it today you would earn a total of  14.00  from holding ALLY FINANCIAL INC or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

American Express  vs.  ALLY FINANCIAL INC

American Express

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ALLY FINANCIAL INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALLY FINANCIAL INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 02005NBJ8 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and 02005NBJ8

The main advantage of trading using opposite American Express and 02005NBJ8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, 02005NBJ8 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 02005NBJ8 will offset losses from the drop in 02005NBJ8's long position.

The idea behind American Express and ALLY FINANCIAL INC 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.