Correlation Between American Express and Carsales
Can any of the company-specific risk be diversified away by investing in both American Express and Carsales 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 Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on American Express and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Carsales.
Diversification Opportunities for American Express and Carsales
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Carsales is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding American Express and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of American Express i.e., American Express and Carsales go up and down completely randomly.
Pair Corralation between American Express and Carsales
Considering the 90-day investment horizon American Express is expected to generate 0.63 times more return on investment than Carsales. However, American Express is 1.59 times less risky than Carsales. It trades about 0.12 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.04 per unit of risk. If you would invest 21,752 in American Express on August 27, 2024 and sell it today you would earn a total of 8,378 from holding American Express or generate 38.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.81% |
| Values | Daily Returns |
American Express vs. CarsalesCom Ltd ADR
Performance |
| Timeline |
| American Express |
| CarsalesCom ADR |
American Express and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Carsales
The main advantage of trading using opposite American Express and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
| Carsales vs. Trivago NV | Carsales vs. YY Inc Class | Carsales vs. DouYu International Holdings | Carsales vs. Tencent Music Entertainment |
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.
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