Correlation Between MicroSectorsTM Oil and American Express
Can any of the company-specific risk be diversified away by investing in both MicroSectorsTM Oil 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 MicroSectorsTM Oil and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectorsTM Oil Gas and American Express, you can compare the effects of market volatilities on MicroSectorsTM Oil 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 MicroSectorsTM Oil with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectorsTM Oil and American Express.
Diversification Opportunities for MicroSectorsTM Oil and American Express
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MicroSectorsTM and American is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectorsTM Oil Gas and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas 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 MicroSectorsTM Oil i.e., MicroSectorsTM Oil and American Express go up and down completely randomly.
Pair Corralation between MicroSectorsTM Oil and American Express
Given the investment horizon of 90 days MicroSectorsTM Oil Gas is expected to under-perform the American Express. In addition to that, MicroSectorsTM Oil is 2.63 times more volatile than American Express. It trades about -0.04 of its total potential returns per unit of risk. American Express is currently generating about 0.08 per unit of volatility. If you would invest 17,096 in American Express on January 24, 2024 and sell it today you would earn a total of 6,800 from holding American Express or generate 39.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectorsTM Oil Gas vs. American Express
Performance |
| Timeline |
| MicroSectorsTM Oil Gas |
| American Express |
MicroSectorsTM Oil and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectorsTM Oil and American Express
The main advantage of trading using opposite MicroSectorsTM Oil and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas 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.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Oshidori International Holdings | American Express vs. US70082LAB36 |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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