Correlation Between American Express and Deutsche Equity
Can any of the company-specific risk be diversified away by investing in both American Express and Deutsche Equity 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 Deutsche Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Deutsche Equity 500, you can compare the effects of market volatilities on American Express and Deutsche Equity 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 Deutsche Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Deutsche Equity.
Diversification Opportunities for American Express and Deutsche Equity
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Deutsche is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Deutsche Equity 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Equity 500 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 Deutsche Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Equity 500 has no effect on the direction of American Express i.e., American Express and Deutsche Equity go up and down completely randomly.
Pair Corralation between American Express and Deutsche Equity
Considering the 90-day investment horizon American Express is expected to generate 2.38 times more return on investment than Deutsche Equity. However, American Express is 2.38 times more volatile than Deutsche Equity 500. It trades about 0.17 of its potential returns per unit of risk. Deutsche Equity 500 is currently generating about 0.13 per unit of risk. If you would invest 26,552 in American Express on August 25, 2024 and sell it today you would earn a total of 3,578 from holding American Express or generate 13.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Deutsche Equity 500
Performance |
| Timeline |
| American Express |
| Deutsche Equity 500 |
American Express and Deutsche Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Deutsche Equity
The main advantage of trading using opposite American Express and Deutsche Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Deutsche Equity 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 Deutsche Equity will offset losses from the drop in Deutsche Equity's long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
| Deutsche Equity vs. Deutsche Sp 500 | Deutsche Equity vs. Simt Sp 500 | Deutsche Equity vs. Mainstay Sp 500 | Deutsche Equity vs. Siit Dynamic Asset |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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