Correlation Between Bitfarms and American Express

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

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

Diversification Opportunities for Bitfarms and American Express

-0.62

Correlation Coefficient

Bitfarms  American Express

Excellent diversification

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

Pair Corralation between Bitfarms and American Express

Given the investment horizon of 90 days Bitfarms is expected to under-perform the American Express. In addition to that, Bitfarms is 3.11 times more volatile than American Express. It trades about -0.06 of its total potential returns per unit of risk. American Express is currently generating about 0.08 per unit of volatility. If you would invest  22,533  in American Express on February 23, 2024 and sell it today you would earn a total of  1,013  from holding American Express or generate 4.5% return on investment over 90 days.

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

Bitfarms  vs.  American Express

Bitfarms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bitfarms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Even with relatively conflicting basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bitfarms and American Express

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

The idea behind Bitfarms and American Express 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.