Correlation Between American Express and DIGITAL

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

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

Diversification Opportunities for American Express and DIGITAL

-0.14

Correlation Coefficient

American Express  DIGITAL

Good diversification

The 3 months correlation between American and DIGITAL is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Express and DIGITAL REALTY TRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIGITAL REALTY TRUST 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 DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIGITAL REALTY TRUST has no effect on the direction of American Express i.e., American Express and DIGITAL go up and down completely randomly.

Pair Corralation between American Express and DIGITAL

Considering the 90-day investment horizon American Express is expected to under-perform the DIGITAL. In addition to that, American Express is 3.13 times more volatile than DIGITAL REALTY TRUST. It trades about -0.08 of its total potential returns per unit of risk. DIGITAL REALTY TRUST is currently generating about -0.09 per unit of volatility. If you would invest  9,469  in DIGITAL REALTY TRUST on December 29, 2024 and sell it today you would lose (277.00) from holding DIGITAL REALTY TRUST or give up 2.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

American Express  vs.  DIGITAL REALTY TRUST

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

DIGITAL REALTY TRUST

Risk-Adjusted Performance

Very Weak

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

Pair Trading with American Express and DIGITAL

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

The idea behind American Express and DIGITAL REALTY TRUST 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.