Correlation Between Carlyle and American Express

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

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

Diversification Opportunities for Carlyle and American Express

0.86

Correlation Coefficient

Carlyle  American Express

Very poor diversification

The 3 months correlation between Carlyle and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Carlyle 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 Carlyle Group 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 Carlyle i.e., Carlyle and American Express go up and down completely randomly.

Pair Corralation between Carlyle and American Express

Allowing for the 90-day total investment horizon Carlyle Group is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, Carlyle Group is 1.28 times less risky than American Express. The stock trades about -0.03 of its potential returns per unit of risk. The American Express is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  22,533  in American Express on January 25, 2024 and sell it today you would earn a total of  1,517  from holding American Express or generate 6.73% return on investment over 90 days.

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

Carlyle Group  vs.  American Express

Carlyle Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

American Express

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and American Express

The main advantage of trading using opposite Carlyle and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle 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 Carlyle Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.