Correlation Between American Express and Frasers Centrepoint

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Can any of the company-specific risk be diversified away by investing in both American Express and Frasers Centrepoint 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 Frasers Centrepoint into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Frasers Centrepoint Trust, you can compare the effects of market volatilities on American Express and Frasers Centrepoint 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 Frasers Centrepoint. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Frasers Centrepoint.

Diversification Opportunities for American Express and Frasers Centrepoint

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between American and Frasers is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Frasers Centrepoint Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frasers Centrepoint Trust 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 Frasers Centrepoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frasers Centrepoint Trust has no effect on the direction of American Express i.e., American Express and Frasers Centrepoint go up and down completely randomly.

Pair Corralation between American Express and Frasers Centrepoint

Considering the 90-day investment horizon American Express is expected to generate 0.83 times more return on investment than Frasers Centrepoint. However, American Express is 1.21 times less risky than Frasers Centrepoint. It trades about 0.04 of its potential returns per unit of risk. Frasers Centrepoint Trust is currently generating about 0.02 per unit of risk. If you would invest  17,311  in American Express on December 30, 2023 and sell it today you would earn a total of  5,458  from holding American Express or generate 31.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Frasers Centrepoint Trust

 Performance 
       Timeline  
American Express 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.
Frasers Centrepoint Trust 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Frasers Centrepoint Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

American Express and Frasers Centrepoint Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Frasers Centrepoint

The main advantage of trading using opposite American Express and Frasers Centrepoint positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Frasers Centrepoint 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 Frasers Centrepoint will offset losses from the drop in Frasers Centrepoint's long position.
The idea behind American Express and Frasers Centrepoint Trust 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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