Correlation Between American Express and ARK Next
Can any of the company-specific risk be diversified away by investing in both American Express and ARK Next 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 ARK Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and ARK Next Generation, you can compare the effects of market volatilities on American Express and ARK Next 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 ARK Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and ARK Next.
Diversification Opportunities for American Express and ARK Next
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and ARK is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ARK Next Generation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Next Generation 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 ARK Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Next Generation has no effect on the direction of American Express i.e., American Express and ARK Next go up and down completely randomly.
Pair Corralation between American Express and ARK Next
Considering the 90-day investment horizon American Express is expected to generate 1.39 times less return on investment than ARK Next. But when comparing it to its historical volatility, American Express is 1.24 times less risky than ARK Next. It trades about 0.28 of its potential returns per unit of risk. ARK Next Generation is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 9,071 in ARK Next Generation on August 30, 2024 and sell it today you would earn a total of 1,680 from holding ARK Next Generation or generate 18.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Express vs. ARK Next Generation
Performance |
| Timeline |
| American Express |
| ARK Next Generation |
American Express and ARK Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and ARK Next
The main advantage of trading using opposite American Express and ARK Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, ARK Next 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 ARK Next will offset losses from the drop in ARK Next's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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