Correlation Between American Express and North Peak
Can any of the company-specific risk be diversified away by investing in both American Express and North Peak 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 North Peak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and North Peak Resources, you can compare the effects of market volatilities on American Express and North Peak 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 North Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and North Peak.
Diversification Opportunities for American Express and North Peak
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and North is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Express and North Peak Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Peak Resources 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 North Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Peak Resources has no effect on the direction of American Express i.e., American Express and North Peak go up and down completely randomly.
Pair Corralation between American Express and North Peak
Considering the 90-day investment horizon American Express is expected to generate 0.26 times more return on investment than North Peak. However, American Express is 3.81 times less risky than North Peak. It trades about 0.17 of its potential returns per unit of risk. North Peak Resources is currently generating about -0.08 per unit of risk. If you would invest 27,049 in American Express on August 29, 2024 and sell it today you would earn a total of 3,392 from holding American Express or generate 12.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. North Peak Resources
Performance |
| Timeline |
| American Express |
| North Peak Resources |
American Express and North Peak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and North Peak
The main advantage of trading using opposite American Express and North Peak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, North Peak 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 North Peak will offset losses from the drop in North Peak'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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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