Correlation Between OneMain Holdings and American Express

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

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

Diversification Opportunities for OneMain Holdings and American Express

0.91

Correlation Coefficient

OneMain Holdings  American Express

Almost no diversification

The 3 months correlation between OneMain and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding OneMain Holdings and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and OneMain Holdings 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 OneMain Holdings 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 OneMain Holdings i.e., OneMain Holdings and American Express go up and down completely randomly.

Pair Corralation between OneMain Holdings and American Express

Considering the 90-day investment horizon OneMain Holdings is expected to under-perform the American Express. In addition to that, OneMain Holdings is 1.05 times more volatile than American Express. It trades about -0.31 of its total potential returns per unit of risk. American Express is currently generating about -0.06 per unit of volatility. If you would invest  30,521  in American Express on September 24, 2024 and sell it today you would lose (641.00) from holding American Express or give up 2.1% of portfolio value over 90 days.

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

OneMain Holdings  vs.  American Express

OneMain Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OneMain Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting primary indicators, OneMain Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

American Express

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with OneMain Holdings and American Express

The main advantage of trading using opposite OneMain Holdings and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OneMain Holdings 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 OneMain Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.