Correlation Between American Express and Gaming Realms
Can any of the company-specific risk be diversified away by investing in both American Express and Gaming Realms 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 Gaming Realms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express Co and Gaming Realms plc, you can compare the effects of market volatilities on American Express and Gaming Realms 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 Gaming Realms. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Gaming Realms.
Diversification Opportunities for American Express and Gaming Realms
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Gaming is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Gaming Realms plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Realms plc 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 Co are associated (or correlated) with Gaming Realms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Realms plc has no effect on the direction of American Express i.e., American Express and Gaming Realms go up and down completely randomly.
Pair Corralation between American Express and Gaming Realms
Assuming the 90 days trading horizon American Express Co is expected to generate 0.44 times more return on investment than Gaming Realms. However, American Express Co is 2.27 times less risky than Gaming Realms. It trades about -0.01 of its potential returns per unit of risk. Gaming Realms plc is currently generating about -0.07 per unit of risk. If you would invest 30,102 in American Express Co on October 12, 2024 and sell it today you would lose (62.00) from holding American Express Co or give up 0.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
American Express Co vs. Gaming Realms plc
Performance |
| Timeline |
| American Express |
| Gaming Realms plc |
American Express and Gaming Realms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Gaming Realms
The main advantage of trading using opposite American Express and Gaming Realms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Gaming Realms 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 Gaming Realms will offset losses from the drop in Gaming Realms' long position.| American Express vs. Gaming Realms plc | American Express vs. Sparebank 1 SR | American Express vs. Cembra Money Bank | American Express vs. Bankers Investment Trust |
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Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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