Correlation Between American Express and FEDEX

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

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

Diversification Opportunities for American Express and FEDEX

-0.6

Correlation Coefficient

American Express  FEDEX

Excellent diversification

The 3 months correlation between American and FEDEX is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Express and FEDEX P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P has no effect on the direction of American Express i.e., American Express and FEDEX go up and down completely randomly.

Pair Corralation between American Express and FEDEX

Considering the 90-day investment horizon American Express is expected to generate 2.32 times more return on investment than FEDEX. However, American Express is 2.32 times more volatile than FEDEX P. It trades about 0.14 of its potential returns per unit of risk. FEDEX P is currently generating about -0.02 per unit of risk. If you would invest  18,355  in American Express on September 14, 2024 and sell it today you would earn a total of  11,902  from holding American Express or generate 64.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

American Express  vs.  FEDEX P

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.

FEDEX P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FEDEX P investors.

Pair Trading with American Express and FEDEX

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

The idea behind American Express and FEDEX P 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.