Correlation Between HEDGE Brasil and American Express

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

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

Diversification Opportunities for HEDGE Brasil and American Express

-0.78

Correlation Coefficient

HEDGE Brasil  American Express

Pay attention - limited upside

The 3 months correlation between HEDGE and American is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and HEDGE Brasil 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 HEDGE Brasil Shopping 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 HEDGE Brasil i.e., HEDGE Brasil and American Express go up and down completely randomly.

Pair Corralation between HEDGE Brasil and American Express

Assuming the 90 days trading horizon HEDGE Brasil Shopping is expected to under-perform the American Express. But the fund apears to be less risky and, when comparing its historical volatility, HEDGE Brasil Shopping is 1.04 times less risky than American Express. The fund trades about -0.17 of its potential returns per unit of risk. The American Express is currently generating about 0.37 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  2,106  from holding American Express or generate 12.78% return on investment over 90 days.

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

HEDGE Brasil Shopping  vs.  American Express

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Express

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 15 (%) 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 HEDGE Brasil and American Express

The main advantage of trading using opposite HEDGE Brasil and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEDGE Brasil 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 HEDGE Brasil Shopping 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.