Correlation Between American Express and ProShares Hedge

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

Diversification Opportunities for American Express and ProShares Hedge

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and ProShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ProShares Hedge Replication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Hedge Repl 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 ProShares Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Hedge Repl has no effect on the direction of American Express i.e., American Express and ProShares Hedge go up and down completely randomly.

Pair Corralation between American Express and ProShares Hedge

Considering the 90-day investment horizon American Express is expected to generate 3.41 times more return on investment than ProShares Hedge. However, American Express is 3.41 times more volatile than ProShares Hedge Replication. It trades about 0.03 of its potential returns per unit of risk. ProShares Hedge Replication is currently generating about 0.0 per unit of risk. If you would invest  17,295  in American Express on November 24, 2023 and sell it today you would earn a total of  3,794  from holding American Express or generate 21.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  ProShares Hedge Replication

 Performance 
       Timeline  
American Express 

Risk-Adjusted Performance

23 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.
ProShares Hedge Repl 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Hedge Replication are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

American Express and ProShares Hedge Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and ProShares Hedge

The main advantage of trading using opposite American Express and ProShares Hedge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, ProShares Hedge 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 ProShares Hedge will offset losses from the drop in ProShares Hedge's long position.
The idea behind American Express and ProShares Hedge Replication 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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