Correlation Between LendingClub Corp and American Express

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

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

Diversification Opportunities for LendingClub Corp and American Express

0.9

Correlation Coefficient

LendingClub Corp  American Express

Almost no diversification

The 3 months correlation between LendingClub and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and LendingClub Corp 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 LendingClub Corp 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 LendingClub Corp i.e., LendingClub Corp and American Express go up and down completely randomly.

Pair Corralation between LendingClub Corp and American Express

Allowing for the 90-day total investment horizon LendingClub Corp is expected to generate 2.21 times more return on investment than American Express. However, LendingClub Corp is 2.21 times more volatile than American Express. It trades about 0.1 of its potential returns per unit of risk. American Express is currently generating about 0.14 per unit of risk. If you would invest  647.00  in LendingClub Corp on September 12, 2024 and sell it today you would earn a total of  943.00  from holding LendingClub Corp or generate 145.75% return on investment over 90 days.

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

LendingClub Corp  vs.  American Express

LendingClub Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LendingClub Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, LendingClub Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. Even with relatively weak basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LendingClub Corp and American Express

The main advantage of trading using opposite LendingClub Corp and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LendingClub Corp 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 LendingClub Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.