Correlation Between American Express and Biogen
Can any of the company-specific risk be diversified away by investing in both American Express and Biogen 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 Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Biogen Inc, you can compare the effects of market volatilities on American Express and Biogen 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 Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Biogen.
Diversification Opportunities for American Express and Biogen
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Biogen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen 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 are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of American Express i.e., American Express and Biogen go up and down completely randomly.
Pair Corralation between American Express and Biogen
Assuming the 90 days trading horizon American Express is expected to generate 0.5 times more return on investment than Biogen. However, American Express is 2.0 times less risky than Biogen. It trades about -0.34 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.23 per unit of risk. If you would invest 650,621 in American Express on November 27, 2024 and sell it today you would lose (43,995) from holding American Express or give up 6.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Biogen Inc
Performance |
| Timeline |
| American Express |
| Biogen Inc |
American Express and Biogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Biogen
The main advantage of trading using opposite American Express and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.| American Express vs. Capital One Financial | American Express vs. Burlington Stores | American Express vs. GMxico Transportes SAB | American Express vs. Cognizant Technology Solutions |
| Biogen vs. Burlington Stores | Biogen vs. Hoteles City Express | Biogen vs. Ross Stores | Biogen vs. Southern Copper |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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