Correlation Between American Express and AdvisorShares Dorsey
Can any of the company-specific risk be diversified away by investing in both American Express and AdvisorShares Dorsey 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 AdvisorShares Dorsey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and AdvisorShares Dorsey Wright, you can compare the effects of market volatilities on American Express and AdvisorShares Dorsey 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 AdvisorShares Dorsey. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and AdvisorShares Dorsey.
Diversification Opportunities for American Express and AdvisorShares Dorsey
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and AdvisorShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Express and AdvisorShares Dorsey Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Dorsey 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 AdvisorShares Dorsey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Dorsey has no effect on the direction of American Express i.e., American Express and AdvisorShares Dorsey go up and down completely randomly.
Pair Corralation between American Express and AdvisorShares Dorsey
Considering the 90-day investment horizon American Express is expected to generate 1.52 times more return on investment than AdvisorShares Dorsey. However, American Express is 1.52 times more volatile than AdvisorShares Dorsey Wright. It trades about 0.1 of its potential returns per unit of risk. AdvisorShares Dorsey Wright is currently generating about 0.06 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. AdvisorShares Dorsey Wright
Performance |
| Timeline |
| American Express |
| AdvisorShares Dorsey |
American Express and AdvisorShares Dorsey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and AdvisorShares Dorsey
The main advantage of trading using opposite American Express and AdvisorShares Dorsey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, AdvisorShares Dorsey 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 AdvisorShares Dorsey will offset losses from the drop in AdvisorShares Dorsey'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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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