Correlation Between Investment and American Express

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

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

Diversification Opportunities for Investment and American Express

0.93

Correlation Coefficient

Investment  American Express

Almost no diversification

The 3 months correlation between Investment and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Investment 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 Investment Of America 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 Investment i.e., Investment and American Express go up and down completely randomly.

Pair Corralation between Investment and American Express

Assuming the 90 days horizon Investment Of America is expected to under-perform the American Express. But the mutual fund apears to be less risky and, when comparing its historical volatility, Investment Of America is 1.54 times less risky than American Express. The mutual fund trades about -0.05 of its potential returns per unit of risk. The American Express is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  22,029  in American Express on January 17, 2024 and sell it today you would lose (189.00) from holding American Express or give up 0.86% of portfolio value over 90 days.

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

Investment Of America  vs.  American Express

Investment Of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investment Of America are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Investment may actually be approaching a critical reversion point that can send shares even higher in May 2024.

American Express

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 18 (%) 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 Investment and American Express

The main advantage of trading using opposite Investment and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment 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 Investment Of America 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.