Correlation Between American Express and Essential Energy
Can any of the company-specific risk be diversified away by investing in both American Express and Essential Energy 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 Essential Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Essential Energy Services, you can compare the effects of market volatilities on American Express and Essential Energy 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 Essential Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Essential Energy.
Diversification Opportunities for American Express and Essential Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Essential is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Essential Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Energy Services 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 Essential Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Energy Services has no effect on the direction of American Express i.e., American Express and Essential Energy go up and down completely randomly.
Pair Corralation between American Express and Essential Energy
If you would invest 26,789 in American Express on September 3, 2024 and sell it today you would earn a total of 3,679 from holding American Express or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 2.38% |
| Values | Daily Returns |
American Express vs. Essential Energy Services
Performance |
| Timeline |
| American Express |
| Essential Energy Services |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Express and Essential Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Essential Energy
The main advantage of trading using opposite American Express and Essential Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Essential Energy 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 Essential Energy will offset losses from the drop in Essential Energy's long position.| American Express vs. Highway Holdings Limited | American Express vs. QCR Holdings | American Express vs. Partner Communications | American Express vs. Acumen Pharmaceuticals |
| Essential Energy vs. Source Energy Services | Essential Energy vs. Total Energy Services | Essential Energy vs. Trican Well Service | Essential Energy vs. STEP Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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