Correlation Between United Parcel and American Express

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

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

Diversification Opportunities for United Parcel and American Express

-0.18

Correlation Coefficient

United Parcel  American Express

Good diversification

The 3 months correlation between United and American is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and American Express go up and down completely randomly.

Pair Corralation between United Parcel and American Express

Considering the 90-day investment horizon United Parcel Service is expected to under-perform the American Express. In addition to that, United Parcel is 1.86 times more volatile than American Express. It trades about -0.14 of its total potential returns per unit of risk. American Express is currently generating about -0.06 per unit of volatility. If you would invest  22,101  in American Express on January 19, 2024 and sell it today you would lose (351.00) from holding American Express or give up 1.59% of portfolio value over 90 days.

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

United Parcel Service  vs.  American Express

United Parcel Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

American Express

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Parcel and American Express

The main advantage of trading using opposite United Parcel and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 United Parcel Service 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.