Correlation Between American Express and CF Acquisition
Can any of the company-specific risk be diversified away by investing in both American Express and CF Acquisition 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 CF Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and CF Acquisition VII, you can compare the effects of market volatilities on American Express and CF Acquisition 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 CF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and CF Acquisition.
Diversification Opportunities for American Express and CF Acquisition
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and CFFS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Express and CF Acquisition VII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition VII 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 CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition VII has no effect on the direction of American Express i.e., American Express and CF Acquisition go up and down completely randomly.
Pair Corralation between American Express and CF Acquisition
Considering the 90-day investment horizon American Express is expected to generate 7.8 times more return on investment than CF Acquisition. However, American Express is 7.8 times more volatile than CF Acquisition VII. It trades about 0.27 of its potential returns per unit of risk. CF Acquisition VII is currently generating about 0.18 per unit of risk. If you would invest 27,147 in American Express on August 29, 2024 and sell it today you would earn a total of 3,278 from holding American Express or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. CF Acquisition VII
Performance |
| Timeline |
| American Express |
| CF Acquisition VII |
American Express and CF Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and CF Acquisition
The main advantage of trading using opposite American Express and CF Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, CF Acquisition 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 CF Acquisition will offset losses from the drop in CF Acquisition's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |