Correlation Between Mastercard Incorporated and American Express
Can any of the company-specific risk be diversified away by investing in both Mastercard Incorporated 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 Mastercard Incorporated and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard Incorporated and American Express, you can compare the effects of market volatilities on Mastercard Incorporated 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 Mastercard Incorporated with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard Incorporated and American Express.
Diversification Opportunities for Mastercard Incorporated and American Express
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mastercard and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated i.e., Mastercard Incorporated and American Express go up and down completely randomly.
Pair Corralation between Mastercard Incorporated and American Express
Assuming the 90 days horizon Mastercard Incorporated is expected to generate 1.31 times less return on investment than American Express. But when comparing it to its historical volatility, Mastercard Incorporated is 1.45 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 0.14 of returns per unit of risk over similar time horizon. If you would invest 510,778 in American Express on September 24, 2024 and sell it today you would earn a total of 85,288 from holding American Express or generate 16.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Mastercard Incorporated vs. American Express
Performance |
Timeline |
Mastercard Incorporated |
American Express |
Mastercard Incorporated and American Express Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mastercard Incorporated and American Express
The main advantage of trading using opposite Mastercard Incorporated and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard Incorporated 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.Mastercard Incorporated vs. Visa Inc | Mastercard Incorporated vs. American Express | Mastercard Incorporated vs. Capital One Financial | Mastercard Incorporated vs. The Western Union |
American Express vs. Visa Inc | American Express vs. Mastercard Incorporated | American Express vs. Capital One Financial | American Express vs. The Western Union |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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