Correlation Between Fidelity National and American Express

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

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

Diversification Opportunities for Fidelity National and American Express

0.57

Correlation Coefficient

Fidelity National  American Express

Very weak diversification

The 3 months correlation between Fidelity and American is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Fidelity National 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 Fidelity National Information are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Fidelity National i.e., Fidelity National and American Express go up and down completely randomly.

Pair Corralation between Fidelity National and American Express

Assuming the 90 days trading horizon Fidelity National is expected to generate 8.58 times less return on investment than American Express. But when comparing it to its historical volatility, Fidelity National Information is 1.12 times less risky than American Express. It trades about 0.04 of its potential returns per unit of risk. American Express is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  16,473  in American Express on September 17, 2024 and sell it today you would earn a total of  1,806  from holding American Express or generate 10.96% return on investment over 90 days.

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

Fidelity National Information  vs.  American Express

Fidelity National

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite somewhat weak basic indicators, American Express sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity National and American Express

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

The idea behind Fidelity National Information and American Express 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.