Correlation Between American Express and Metrogas
Can any of the company-specific risk be diversified away by investing in both American Express and Metrogas 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 Metrogas 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 Metrogas SA, you can compare the effects of market volatilities on American Express and Metrogas 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 Metrogas. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Metrogas.
Diversification Opportunities for American Express and Metrogas
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Metrogas is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Metrogas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrogas SA 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 Metrogas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrogas SA has no effect on the direction of American Express i.e., American Express and Metrogas go up and down completely randomly.
Pair Corralation between American Express and Metrogas
Assuming the 90 days trading horizon American Express Co is expected to generate 0.54 times more return on investment than Metrogas. However, American Express Co is 1.86 times less risky than Metrogas. It trades about 0.23 of its potential returns per unit of risk. Metrogas SA is currently generating about -0.12 per unit of risk. If you would invest 2,327,495 in American Express Co on November 2, 2024 and sell it today you would earn a total of 197,505 from holding American Express Co or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express Co vs. Metrogas SA
Performance |
| Timeline |
| American Express |
| Metrogas SA |
American Express and Metrogas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Metrogas
The main advantage of trading using opposite American Express and Metrogas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Metrogas 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 Metrogas will offset losses from the drop in Metrogas' long position.| American Express vs. International Business Machines | American Express vs. Transportadora de Gas | American Express vs. Agrometal SAI | American Express vs. Grimoldi SA |
| Metrogas vs. Edesa Holding SA | Metrogas vs. Longvie SA | Metrogas vs. Vista Energy, SAB | Metrogas 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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