Correlation Between Light Science and American Express

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

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

Diversification Opportunities for Light Science and American Express

-0.37

Correlation Coefficient

Light Science  American Express

Very good diversification

The 3 months correlation between Light and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Light Science Technologies and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Light Science 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 Light Science Technologies 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 Light Science i.e., Light Science and American Express go up and down completely randomly.

Pair Corralation between Light Science and American Express

Assuming the 90 days trading horizon Light Science Technologies is expected to generate 2.96 times more return on investment than American Express. However, Light Science is 2.96 times more volatile than American Express Co. It trades about 0.04 of its potential returns per unit of risk. American Express Co is currently generating about -0.09 per unit of risk. If you would invest  270.00  in Light Science Technologies on December 23, 2024 and sell it today you would earn a total of  20.00  from holding Light Science Technologies or generate 7.41% return on investment over 90 days.

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

Light Science Technologies  vs.  American Express Co

Light Science Techno

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Light Science Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Light Science exhibited 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 Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Light Science and American Express

The main advantage of trading using opposite Light Science and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Science 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 Light Science Technologies and American Express Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.