Correlation Between American Express and PACIFIC

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

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

Diversification Opportunities for American Express and PACIFIC

-0.17

Correlation Coefficient

American Express  PACIFIC

Good diversification

The 3 months correlation between American and PACIFIC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Express and PACIFIC GAS AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS AND 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS AND has no effect on the direction of American Express i.e., American Express and PACIFIC go up and down completely randomly.

Pair Corralation between American Express and PACIFIC

Considering the 90-day investment horizon American Express is expected to generate 0.81 times more return on investment than PACIFIC. However, American Express is 1.24 times less risky than PACIFIC. It trades about 0.09 of its potential returns per unit of risk. PACIFIC GAS AND is currently generating about 0.04 per unit of risk. If you would invest  17,053  in American Express on October 22, 2024 and sell it today you would earn a total of  14,203  from holding American Express or generate 83.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

American Express  vs.  PACIFIC GAS AND

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 fragile basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

PACIFIC GAS AND

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACIFIC GAS AND are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, PACIFIC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and PACIFIC

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

The idea behind American Express and PACIFIC GAS AND 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..