Correlation Between American Express and Volt Lithium

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

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

Diversification Opportunities for American Express and Volt Lithium

0.31

Correlation Coefficient

American Express  Volt Lithium

Weak diversification

The 3 months correlation between American and Volt is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Volt Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volt Lithium Corp 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 Volt Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volt Lithium Corp has no effect on the direction of American Express i.e., American Express and Volt Lithium go up and down completely randomly.

Pair Corralation between American Express and Volt Lithium

Considering the 90-day investment horizon American Express is expected to under-perform the Volt Lithium. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 4.97 times less risky than Volt Lithium. The stock trades about -0.29 of its potential returns per unit of risk. The Volt Lithium Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Volt Lithium Corp on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Volt Lithium Corp or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Express  vs.  Volt Lithium Corp

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.

Volt Lithium Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Volt Lithium Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Volt Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Volt Lithium

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

The idea behind American Express and Volt Lithium Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.