Correlation Between American Express and VanEck Biotech
Can any of the company-specific risk be diversified away by investing in both American Express and VanEck Biotech 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 VanEck Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and VanEck Biotech ETF, you can compare the effects of market volatilities on American Express and VanEck Biotech 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 VanEck Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and VanEck Biotech.
Diversification Opportunities for American Express and VanEck Biotech
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and VanEck is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Express and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF 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 VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of American Express i.e., American Express and VanEck Biotech go up and down completely randomly.
Pair Corralation between American Express and VanEck Biotech
Considering the 90-day investment horizon American Express is expected to generate 1.29 times more return on investment than VanEck Biotech. However, American Express is 1.29 times more volatile than VanEck Biotech ETF. It trades about 0.22 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about -0.09 per unit of risk. If you would invest 20,081 in American Express on January 26, 2024 and sell it today you would earn a total of 3,831 from holding American Express or generate 19.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Express vs. VanEck Biotech ETF
Performance |
Timeline |
American Express |
VanEck Biotech ETF |
American Express and VanEck Biotech Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and VanEck Biotech
The main advantage of trading using opposite American Express and VanEck Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, VanEck Biotech 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 VanEck Biotech will offset losses from the drop in VanEck Biotech's long position.American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart HoldingsInc |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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