Correlation Between American Express and Burnham Holdings
Can any of the company-specific risk be diversified away by investing in both American Express and Burnham Holdings 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 Burnham Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Burnham Holdings, you can compare the effects of market volatilities on American Express and Burnham Holdings 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 Burnham Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Burnham Holdings.
Diversification Opportunities for American Express and Burnham Holdings
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Burnham is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Burnham Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burnham Holdings 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 Burnham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burnham Holdings has no effect on the direction of American Express i.e., American Express and Burnham Holdings go up and down completely randomly.
Pair Corralation between American Express and Burnham Holdings
Considering the 90-day investment horizon American Express is expected to generate 0.77 times more return on investment than Burnham Holdings. However, American Express is 1.3 times less risky than Burnham Holdings. It trades about 0.17 of its potential returns per unit of risk. Burnham Holdings is currently generating about 0.11 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Burnham Holdings
Performance |
| Timeline |
| American Express |
| Burnham Holdings |
American Express and Burnham Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Burnham Holdings
The main advantage of trading using opposite American Express and Burnham Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Burnham Holdings 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 Burnham Holdings will offset losses from the drop in Burnham Holdings' long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
| Burnham Holdings vs. Travis Perkins PLC | Burnham Holdings vs. Armstrong World Industries | Burnham Holdings vs. Apogee Enterprises |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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