Correlation Between American Express and FT Cboe
Can any of the company-specific risk be diversified away by investing in both American Express and FT Cboe 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 FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and FT Cboe Vest, you can compare the effects of market volatilities on American Express and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and FT Cboe.
Diversification Opportunities for American Express and FT Cboe
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and DJUL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Express and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of American Express i.e., American Express and FT Cboe go up and down completely randomly.
Pair Corralation between American Express and FT Cboe
Considering the 90-day investment horizon American Express is expected to generate 3.7 times more return on investment than FT Cboe. However, American Express is 3.7 times more volatile than FT Cboe Vest. It trades about 0.19 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.11 per unit of risk. If you would invest 27,083 in American Express on October 26, 2024 and sell it today you would earn a total of 5,504 from holding American Express or generate 20.32% 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. FT Cboe Vest
Performance |
| Timeline |
| American Express |
| FT Cboe Vest |
American Express and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and FT Cboe
The main advantage of trading using opposite American Express and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart Holdings |
| FT Cboe vs. FT Cboe Vest | FT Cboe vs. FT Cboe Vest | FT Cboe vs. First Trust Exchange Traded | FT Cboe vs. FT Cboe Vest |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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