Correlation Between American Express and China Merchants
Can any of the company-specific risk be diversified away by investing in both American Express and China Merchants 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 China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and China Merchants Bank, you can compare the effects of market volatilities on American Express and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and China Merchants.
Diversification Opportunities for American Express and China Merchants
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and China is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Express and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of American Express i.e., American Express and China Merchants go up and down completely randomly.
Pair Corralation between American Express and China Merchants
Considering the 90-day investment horizon American Express is expected to generate 0.62 times more return on investment than China Merchants. However, American Express is 1.62 times less risky than China Merchants. It trades about 0.1 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.01 per unit of risk. If you would invest 15,064 in American Express on August 27, 2024 and sell it today you would earn a total of 15,066 from holding American Express or generate 100.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. China Merchants Bank
Performance |
| Timeline |
| American Express |
| China Merchants Bank |
American Express and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and China Merchants
The main advantage of trading using opposite American Express and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
| China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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