Correlation Between American Express and Amazon
Can any of the company-specific risk be diversified away by investing in both American Express and Amazon 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 Amazon 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 Amazon Inc, you can compare the effects of market volatilities on American Express and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Amazon.
Diversification Opportunities for American Express and Amazon
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Amazon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of American Express i.e., American Express and Amazon go up and down completely randomly.
Pair Corralation between American Express and Amazon
Assuming the 90 days trading horizon American Express is expected to generate 1.92 times less return on investment than Amazon. In addition to that, American Express is 1.1 times more volatile than Amazon Inc. It trades about 0.24 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.5 per unit of volatility. If you would invest 158,000 in Amazon Inc on September 19, 2024 and sell it today you would earn a total of 26,500 from holding Amazon Inc or generate 16.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express Co vs. Amazon Inc
Performance |
| Timeline |
| American Express |
| Amazon Inc |
American Express and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Amazon
The main advantage of trading using opposite American Express and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| American Express vs. QUALCOMM Incorporated | American Express vs. United States Steel | American Express vs. Pfizer Inc | American Express vs. Distribuidora de Gas |
| Amazon vs. Alibaba Group Holding | Amazon vs. Edesa Holding SA | Amazon vs. Vista Energy, SAB | Amazon vs. American Express Co |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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