Correlation Between American Express and Metallurgical

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

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

Diversification Opportunities for American Express and Metallurgical

-0.77

Correlation Coefficient

American Express  Metallurgical

Pay attention - limited upside

The 3 months correlation between American and Metallurgical is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Metallurgical of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metallurgical 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 Metallurgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metallurgical has no effect on the direction of American Express i.e., American Express and Metallurgical go up and down completely randomly.

Pair Corralation between American Express and Metallurgical

Considering the 90-day investment horizon American Express is expected to generate 0.68 times more return on investment than Metallurgical. However, American Express is 1.47 times less risky than Metallurgical. It trades about 0.11 of its potential returns per unit of risk. Metallurgical of is currently generating about -0.21 per unit of risk. If you would invest  21,820  in American Express on March 12, 2024 and sell it today you would earn a total of  1,288  from holding American Express or generate 5.9% return on investment over 90 days.

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

American Express  vs.  Metallurgical of

American Express

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, American Express is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Metallurgical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metallurgical of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with American Express and Metallurgical

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

The idea behind American Express and Metallurgical of 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.