Correlation Between Xp and American Express

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

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

Diversification Opportunities for Xp and American Express

-0.74

Correlation Coefficient

Xp  American Express

Pay attention - limited upside

The 3 months correlation between Xp and American is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Xp 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 Xp Inc 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 Xp i.e., Xp and American Express go up and down completely randomly.

Pair Corralation between Xp and American Express

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the American Express. In addition to that, Xp is 1.39 times more volatile than American Express. It trades about -0.13 of its total potential returns per unit of risk. American Express is currently generating about 0.16 per unit of volatility. If you would invest  25,798  in American Express on August 30, 2024 and sell it today you would earn a total of  4,627  from holding American Express or generate 17.94% return on investment over 90 days.

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

Xp Inc  vs.  American Express

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

American Express

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and American Express

The main advantage of trading using opposite Xp and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp 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 Xp Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.