Correlation Between American Express and VARNO

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

By analyzing existing cross correlation between American Express and VARNO 8 15 NOV 32, you can compare the effects of market volatilities on American Express and VARNO 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 VARNO. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and VARNO.

Diversification Opportunities for American Express and VARNO

-0.55

Correlation Coefficient

American Express  VARNO

Excellent diversification

The 3 months correlation between American and VARNO is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Express and VARNO 8 15 NOV 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARNO 8 15 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 VARNO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARNO 8 15 has no effect on the direction of American Express i.e., American Express and VARNO go up and down completely randomly.

Pair Corralation between American Express and VARNO

Considering the 90-day investment horizon American Express is expected to generate 2.58 times more return on investment than VARNO. However, American Express is 2.58 times more volatile than VARNO 8 15 NOV 32. It trades about 0.03 of its potential returns per unit of risk. VARNO 8 15 NOV 32 is currently generating about -0.06 per unit of risk. If you would invest  29,773  in American Express on December 2, 2024 and sell it today you would earn a total of  323.00  from holding American Express or generate 1.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	65.0%
Values	Daily Returns

American Express  vs.  VARNO 8 15 NOV 32

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 relatively invariable basic indicators, American Express is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

VARNO 8 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days VARNO 8 15 NOV 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VARNO 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 VARNO

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

The idea behind American Express and VARNO 8 15 NOV 32 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.