Correlation Between Medallion Financial and American Express

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

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

Diversification Opportunities for Medallion Financial and American Express

0.19

Correlation Coefficient

Medallion Financial  American Express

Average diversification

The 3 months correlation between Medallion and American is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Medallion Financial Corp and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Medallion Financial 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 Medallion Financial 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 Medallion Financial i.e., Medallion Financial and American Express go up and down completely randomly.

Pair Corralation between Medallion Financial and American Express

Given the investment horizon of 90 days Medallion Financial Corp is expected to generate 1.31 times more return on investment than American Express. However, Medallion Financial is 1.31 times more volatile than American Express. It trades about -0.03 of its potential returns per unit of risk. American Express is currently generating about -0.09 per unit of risk. If you would invest  929.00  in Medallion Financial Corp on December 22, 2024 and sell it today you would lose (49.00) from holding Medallion Financial Corp or give up 5.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Medallion Financial Corp  vs.  American Express

Medallion Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medallion Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Medallion Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Medallion Financial and American Express

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

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.