Correlation Between American Express and Newell

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

By analyzing existing cross correlation between American Express and Newell Brands 5375, you can compare the effects of market volatilities on American Express and Newell 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 Newell. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Newell.

Diversification Opportunities for American Express and Newell

-0.41

Correlation Coefficient

American Express  Newell

Very good diversification

The 3 months correlation between American and Newell is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Newell Brands 5375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 5375 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 Newell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands 5375 has no effect on the direction of American Express i.e., American Express and Newell go up and down completely randomly.

Pair Corralation between American Express and Newell

Considering the 90-day investment horizon American Express is expected to generate 11.61 times less return on investment than Newell. But when comparing it to its historical volatility, American Express is 29.2 times less risky than Newell. It trades about 0.1 of its potential returns per unit of risk. Newell Brands 5375 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,720  in Newell Brands 5375 on September 13, 2024 and sell it today you would lose (738.00) from holding Newell Brands 5375 or give up 8.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

American Express  vs.  Newell Brands 5375

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.

Newell Brands 5375

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newell Brands 5375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for Newell Brands 5375 investors.

Pair Trading with American Express and Newell

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

The idea behind American Express and Newell Brands 5375 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..