Correlation Between American Express and Compania
Can any of the company-specific risk be diversified away by investing in both American Express and Compania 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 Compania 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 Compania de Transporte, you can compare the effects of market volatilities on American Express and Compania 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 Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Compania.
Diversification Opportunities for American Express and Compania
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Compania is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of American Express i.e., American Express and Compania go up and down completely randomly.
Pair Corralation between American Express and Compania
Assuming the 90 days trading horizon American Express Co is expected to generate 0.53 times more return on investment than Compania. However, American Express Co is 1.9 times less risky than Compania. It trades about 0.29 of its potential returns per unit of risk. Compania de Transporte is currently generating about -0.25 per unit of risk. If you would invest 2,257,500 in American Express Co on October 20, 2024 and sell it today you would earn a total of 215,000 from holding American Express Co or generate 9.52% 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. Compania de Transporte
Performance |
| Timeline |
| American Express |
| Compania de Transporte |
American Express and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Compania
The main advantage of trading using opposite American Express and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.| American Express vs. United States Steel | American Express vs. Agrometal SAI | American Express vs. Telecom Argentina | American Express vs. Compania de Transporte |
| Compania vs. Pampa Energia SA | Compania vs. American Express Co | Compania vs. Transportadora de Gas | Compania vs. Central Puerto 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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