Correlation Between American Express and Arch Therapeutics
Can any of the company-specific risk be diversified away by investing in both American Express and Arch Therapeutics 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 Arch Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Arch Therapeutics, you can compare the effects of market volatilities on American Express and Arch Therapeutics 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 Arch Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Arch Therapeutics.
Diversification Opportunities for American Express and Arch Therapeutics
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Arch is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Arch Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Therapeutics 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 Arch Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Therapeutics has no effect on the direction of American Express i.e., American Express and Arch Therapeutics go up and down completely randomly.
Pair Corralation between American Express and Arch Therapeutics
Considering the 90-day investment horizon American Express is expected to generate 4.17 times less return on investment than Arch Therapeutics. But when comparing it to its historical volatility, American Express is 11.18 times less risky than Arch Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Arch Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 325.00 in Arch Therapeutics on November 5, 2024 and sell it today you would lose (307.00) from holding Arch Therapeutics or give up 94.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.38% |
| Values | Daily Returns |
American Express vs. Arch Therapeutics
Performance |
| Timeline |
| American Express |
| Arch Therapeutics |
American Express and Arch Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Arch Therapeutics
The main advantage of trading using opposite American Express and Arch Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Arch Therapeutics 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 Arch Therapeutics will offset losses from the drop in Arch Therapeutics' long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| Arch Therapeutics vs. biOasis Technologies | Arch Therapeutics vs. Antibe Therapeutics | Arch Therapeutics vs. Awakn Life Sciences | Arch Therapeutics vs. Cellectis 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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