Correlation Between FirstCash and American Express

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

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

Diversification Opportunities for FirstCash and American Express

-0.55

Correlation Coefficient

FirstCash  American Express

Excellent diversification

The 3 months correlation between FirstCash and American is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and FirstCash 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 FirstCash 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 FirstCash i.e., FirstCash and American Express go up and down completely randomly.

Pair Corralation between FirstCash and American Express

Given the investment horizon of 90 days FirstCash is expected to under-perform the American Express. In addition to that, FirstCash is 1.23 times more volatile than American Express. It trades about -0.03 of its total potential returns per unit of risk. American Express is currently generating about 0.23 per unit of volatility. If you would invest  28,554  in American Express on September 19, 2024 and sell it today you would earn a total of  1,580  from holding American Express or generate 5.53% return on investment over 90 days.

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

FirstCash  vs.  American Express

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

American Express

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FirstCash and American Express

The main advantage of trading using opposite FirstCash and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash 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 FirstCash 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.