Correlation Between American Express and AMA Group
Can any of the company-specific risk be diversified away by investing in both American Express and AMA Group 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 AMA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and AMA Group Limited, you can compare the effects of market volatilities on American Express and AMA Group 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 AMA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and AMA Group.
Diversification Opportunities for American Express and AMA Group
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and AMA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Express and AMA Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMA Group Limited 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 AMA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMA Group Limited has no effect on the direction of American Express i.e., American Express and AMA Group go up and down completely randomly.
Pair Corralation between American Express and AMA Group
Considering the 90-day investment horizon American Express is expected to generate 2.31 times less return on investment than AMA Group. But when comparing it to its historical volatility, American Express is 2.3 times less risky than AMA Group. It trades about 0.28 of its potential returns per unit of risk. AMA Group Limited is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 3.75 in AMA Group Limited on September 4, 2024 and sell it today you would earn a total of 1.00 from holding AMA Group Limited or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Express vs. AMA Group Limited
Performance |
| Timeline |
| American Express |
| AMA Group Limited |
American Express and AMA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and AMA Group
The main advantage of trading using opposite American Express and AMA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, AMA Group 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 AMA Group will offset losses from the drop in AMA Group's long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Enova International | American Express vs. X Financial Class |
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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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