Correlation Between American Express and Deswell Industries
Can any of the company-specific risk be diversified away by investing in both American Express and Deswell Industries 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 Deswell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Deswell Industries, you can compare the effects of market volatilities on American Express and Deswell Industries 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 Deswell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Deswell Industries.
Diversification Opportunities for American Express and Deswell Industries
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Deswell is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries 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 Deswell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deswell Industries has no effect on the direction of American Express i.e., American Express and Deswell Industries go up and down completely randomly.
Pair Corralation between American Express and Deswell Industries
Considering the 90-day investment horizon American Express is expected to generate 0.72 times more return on investment than Deswell Industries. However, American Express is 1.39 times less risky than Deswell Industries. It trades about 0.1 of its potential returns per unit of risk. Deswell Industries is currently generating about 0.01 per unit of risk. If you would invest 14,986 in American Express on August 30, 2024 and sell it today you would earn a total of 15,439 from holding American Express or generate 103.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
American Express vs. Deswell Industries
Performance |
| Timeline |
| American Express |
| Deswell Industries |
American Express and Deswell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Deswell Industries
The main advantage of trading using opposite American Express and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Deswell Industries 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 Deswell Industries will offset losses from the drop in Deswell Industries' long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. X Financial Class | American Express vs. Yirendai |
| Deswell Industries vs. Fabrinet | Deswell Industries vs. Knowles Cor | Deswell Industries vs. Ubiquiti Networks | Deswell Industries vs. AmpliTech Group |
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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