Correlation Between SPDR Index and American Express

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

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

Diversification Opportunities for SPDR Index and American Express

-0.87

Correlation Coefficient

SPDR Index  American Express

Pay attention - limited upside

The 3 months correlation between SPDR and American is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Index Shares and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and SPDR Index 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 SPDR Index Shares 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 SPDR Index i.e., SPDR Index and American Express go up and down completely randomly.

Pair Corralation between SPDR Index and American Express

Assuming the 90 days trading horizon SPDR Index Shares is expected to generate 0.78 times more return on investment than American Express. However, SPDR Index Shares is 1.28 times less risky than American Express. It trades about 0.15 of its potential returns per unit of risk. American Express is currently generating about -0.1 per unit of risk. If you would invest  99,900  in SPDR Index Shares on December 30, 2024 and sell it today you would earn a total of  12,405  from holding SPDR Index Shares or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

SPDR Index Shares  vs.  American Express

SPDR Index Shares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Index Shares are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Index showed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SPDR Index and American Express

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