Correlation Between American Express and Controladora Vuela

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

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

Diversification Opportunities for American Express and Controladora Vuela

0.47

Correlation Coefficient

American Express  Controladora Vuela

Very weak diversification

The 3 months correlation between American and Controladora is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Controladora Vuela Compaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Controladora Vuela Compaa and American Express 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 American Express are associated (or correlated) with Controladora Vuela. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Controladora Vuela Compaa has no effect on the direction of American Express i.e., American Express and Controladora Vuela go up and down completely randomly.

Pair Corralation between American Express and Controladora Vuela

Assuming the 90 days trading horizon American Express is expected to generate 0.66 times more return on investment than Controladora Vuela. However, American Express is 1.52 times less risky than Controladora Vuela. It trades about 0.08 of its potential returns per unit of risk. Controladora Vuela Compaa is currently generating about -0.09 per unit of risk. If you would invest  401,319  in American Express on March 22, 2024 and sell it today you would earn a total of  19,381  from holding American Express or generate 4.83% return on investment over 90 days.

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

American Express  vs.  Controladora Vuela Compaa

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. In spite of fairly weak basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Controladora Vuela Compaa

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with American Express and Controladora Vuela

The main advantage of trading using opposite American Express and Controladora Vuela positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Controladora Vuela 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 Controladora Vuela will offset losses from the drop in Controladora Vuela's long position.

The idea behind American Express and Controladora Vuela Compaa 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.