Correlation Between American Express and N1WG34

Can any of the company-specific risk be diversified away by investing in both American Express and N1WG34 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 N1WG34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and N1WG34, you can compare the effects of market volatilities on American Express and N1WG34 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 N1WG34. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and N1WG34.

Diversification Opportunities for American Express and N1WG34

0.93

Correlation Coefficient

American Express  N1WG34

Almost no diversification

The 3 months correlation between American and N1WG34 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Express and N1WG34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N1WG34 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 N1WG34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N1WG34 has no effect on the direction of American Express i.e., American Express and N1WG34 go up and down completely randomly.

Pair Corralation between American Express and N1WG34

Assuming the 90 days trading horizon American Express is expected to generate 7.06 times less return on investment than N1WG34. But when comparing it to its historical volatility, American Express is 1.39 times less risky than N1WG34. It trades about 0.04 of its potential returns per unit of risk. N1WG34 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,784  in N1WG34 on September 27, 2024 and sell it today you would earn a total of  468.00  from holding N1WG34 or generate 8.09% return on investment over 90 days.

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

American Express  vs.  N1WG34

American Express

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, American Express sustained solid returns over the last few months and may actually be approaching a breakup point.

N1WG34

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in N1WG34 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N1WG34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and N1WG34

The main advantage of trading using opposite American Express and N1WG34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, N1WG34 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 N1WG34 will offset losses from the drop in N1WG34's long position.

The idea behind American Express and N1WG34 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.