Correlation Between American Express and WisdomTree

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

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

Diversification Opportunities for American Express and WisdomTree

0.72

Correlation Coefficient

American Express  WisdomTree

Poor diversification

The 3 months correlation between American and WisdomTree is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Express and WisdomTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 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 WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree has no effect on the direction of American Express i.e., American Express and WisdomTree go up and down completely randomly.

Pair Corralation between American Express and WisdomTree

Considering the 90-day investment horizon American Express is expected to generate 1.0 times more return on investment than WisdomTree. However, American Express is as risky as WisdomTree. It trades about -0.1 of its potential returns per unit of risk. WisdomTree is currently generating about -0.13 per unit of risk. If you would invest  29,663  in American Express on December 30, 2024 and sell it today you would lose (3,115) from holding American Express or give up 10.5% of portfolio value over 90 days.

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

American Express  vs.  WisdomTree

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 latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

WisdomTree

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with American Express and WisdomTree

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

The idea behind American Express and WisdomTree 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.