Correlation Between Astar and American Express
Can any of the company-specific risk be diversified away by investing in both Astar 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 Astar and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astar and American Express Co, you can compare the effects of market volatilities on Astar 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 Astar with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and American Express.
Diversification Opportunities for Astar and American Express
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Astar and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Astar and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Astar 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 Astar 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 Astar i.e., Astar and American Express go up and down completely randomly.
Pair Corralation between Astar and American Express
Assuming the 90 days trading horizon Astar is expected to under-perform the American Express. In addition to that, Astar is 5.04 times more volatile than American Express Co. It trades about -0.16 of its total potential returns per unit of risk. American Express Co is currently generating about -0.05 per unit of volatility. If you would invest 30,339 in American Express Co on October 11, 2024 and sell it today you would lose (339.00) from holding American Express Co or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Astar vs. American Express Co
Performance |
| Timeline |
| Astar |
| American Express |
Astar and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astar and American Express
The main advantage of trading using opposite Astar and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar 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 Astar and American Express Co 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.| American Express vs. Omega Healthcare Investors | American Express vs. Bellevue Healthcare Trust | American Express vs. Abingdon Health Plc | American Express vs. Naturhouse Health SA |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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