Correlation Between AllianceBernstein and American Express

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

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

Diversification Opportunities for AllianceBernstein and American Express

0.57

Correlation Coefficient

AllianceBernstein  American Express

Very weak diversification

The 3 months correlation between AllianceBernstein and American is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding AllianceBernstein Holding LP and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and AllianceBernstein 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 AllianceBernstein Holding LP 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 AllianceBernstein i.e., AllianceBernstein and American Express go up and down completely randomly.

Pair Corralation between AllianceBernstein and American Express

Allowing for the 90-day total investment horizon AllianceBernstein Holding LP is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, AllianceBernstein Holding LP is 1.25 times less risky than American Express. The stock trades about -0.02 of its potential returns per unit of risk. The American Express is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  22,533  in American Express on January 25, 2024 and sell it today you would earn a total of  1,363  from holding American Express or generate 6.05% return on investment over 90 days.

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

AllianceBernstein Holding LP  vs.  American Express

AllianceBernstein

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AllianceBernstein Holding LP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, AllianceBernstein is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Express

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 20 (%) 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 AllianceBernstein and American Express

The main advantage of trading using opposite AllianceBernstein and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AllianceBernstein 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 AllianceBernstein Holding LP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.