Correlation Between American Express and Transportadora
Can any of the company-specific risk be diversified away by investing in both American Express and Transportadora 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 Transportadora 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 Transportadora de Gas, you can compare the effects of market volatilities on American Express and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Transportadora.
Diversification Opportunities for American Express and Transportadora
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Transportadora is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of American Express i.e., American Express and Transportadora go up and down completely randomly.
Pair Corralation between American Express and Transportadora
Assuming the 90 days trading horizon American Express Co is expected to generate 0.47 times more return on investment than Transportadora. However, American Express Co is 2.13 times less risky than Transportadora. It trades about 0.23 of its potential returns per unit of risk. Transportadora de Gas is currently generating about -0.1 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. Transportadora de Gas
Performance |
| Timeline |
| American Express |
| Transportadora de Gas |
American Express and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Transportadora
The main advantage of trading using opposite American Express and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| American Express vs. International Business Machines | American Express vs. Transportadora de Gas | American Express vs. Agrometal SAI | American Express vs. Grimoldi SA |
| Transportadora vs. Agrometal SAI | Transportadora vs. Harmony Gold Mining | Transportadora vs. Compania de Transporte |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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