Correlation Between American Express and UST Inc

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

By analyzing existing cross correlation between American Express and ProShares Ultra 7 10, you can compare the effects of market volatilities on American Express and UST Inc 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 UST Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and UST Inc.

Diversification Opportunities for American Express and UST Inc

-0.7

Correlation Coefficient

American Express  UST Inc

Excellent diversification

The 3 months correlation between American and UST is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ProShares Ultra 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 7 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 UST Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra 7 has no effect on the direction of American Express i.e., American Express and UST Inc go up and down completely randomly.

Pair Corralation between American Express and UST Inc

Considering the 90-day investment horizon American Express is expected to generate 1.72 times more return on investment than UST Inc. However, American Express is 1.72 times more volatile than ProShares Ultra 7 10. It trades about 0.15 of its potential returns per unit of risk. ProShares Ultra 7 10 is currently generating about 0.0 per unit of risk. If you would invest  18,060  in American Express on September 12, 2024 and sell it today you would earn a total of  12,151  from holding American Express or generate 67.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

American Express  vs.  ProShares Ultra 7 10

American Express

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra 7 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with American Express and UST Inc

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

The idea behind American Express and ProShares Ultra 7 10 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.