Correlation Between American Express and Innovator Laddered
Can any of the company-specific risk be diversified away by investing in both American Express and Innovator Laddered 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 Innovator Laddered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Innovator Laddered Allocation, you can compare the effects of market volatilities on American Express and Innovator Laddered 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 Innovator Laddered. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Innovator Laddered.
Diversification Opportunities for American Express and Innovator Laddered
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Innovator is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Innovator Laddered Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Laddered 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 Innovator Laddered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Laddered has no effect on the direction of American Express i.e., American Express and Innovator Laddered go up and down completely randomly.
Pair Corralation between American Express and Innovator Laddered
Considering the 90-day investment horizon American Express is expected to generate 3.85 times more return on investment than Innovator Laddered. However, American Express is 3.85 times more volatile than Innovator Laddered Allocation. It trades about 0.1 of its potential returns per unit of risk. Innovator Laddered Allocation is currently generating about 0.13 per unit of risk. If you would invest 14,986 in American Express on August 30, 2024 and sell it today you would earn a total of 15,439 from holding American Express or generate 103.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Express vs. Innovator Laddered Allocation
Performance |
| Timeline |
| American Express |
| Innovator Laddered |
American Express and Innovator Laddered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Innovator Laddered
The main advantage of trading using opposite American Express and Innovator Laddered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Innovator Laddered 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 Innovator Laddered will offset losses from the drop in Innovator Laddered'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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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