Correlation Between American Express and ECN Capital
Can any of the company-specific risk be diversified away by investing in both American Express and ECN Capital 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 ECN Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and ECN Capital Corp, you can compare the effects of market volatilities on American Express and ECN Capital 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 ECN Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and ECN Capital.
Diversification Opportunities for American Express and ECN Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and ECN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ECN Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECN Capital Corp 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 ECN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECN Capital Corp has no effect on the direction of American Express i.e., American Express and ECN Capital go up and down completely randomly.
Pair Corralation between American Express and ECN Capital
Considering the 90-day investment horizon American Express is expected to generate 0.58 times more return on investment than ECN Capital. However, American Express is 1.74 times less risky than ECN Capital. It trades about 0.19 of its potential returns per unit of risk. ECN Capital Corp is currently generating about -0.08 per unit of risk. If you would invest 28,764 in American Express on September 14, 2024 and sell it today you would earn a total of 1,266 from holding American Express or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. ECN Capital Corp
Performance |
| Timeline |
| American Express |
| ECN Capital Corp |
American Express and ECN Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and ECN Capital
The main advantage of trading using opposite American Express and ECN Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, ECN Capital 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 ECN Capital will offset losses from the drop in ECN Capital's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Upstart Holdings | American Express vs. Mastercard |
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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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