Correlation Between American Express and Elanco Animal
Can any of the company-specific risk be diversified away by investing in both American Express and Elanco Animal 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 Elanco Animal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Elanco Animal Health, you can compare the effects of market volatilities on American Express and Elanco Animal 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 Elanco Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Elanco Animal.
Diversification Opportunities for American Express and Elanco Animal
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Elanco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health 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 Elanco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of American Express i.e., American Express and Elanco Animal go up and down completely randomly.
Pair Corralation between American Express and Elanco Animal
Considering the 90-day investment horizon American Express is expected to generate 0.55 times more return on investment than Elanco Animal. However, American Express is 1.81 times less risky than Elanco Animal. It trades about 0.13 of its potential returns per unit of risk. Elanco Animal Health is currently generating about -0.07 per unit of risk. If you would invest 23,593 in American Express on September 2, 2024 and sell it today you would earn a total of 6,875 from holding American Express or generate 29.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Elanco Animal Health
Performance |
| Timeline |
| American Express |
| Elanco Animal Health |
American Express and Elanco Animal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Elanco Animal
The main advantage of trading using opposite American Express and Elanco Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Elanco Animal 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 Elanco Animal will offset losses from the drop in Elanco Animal's long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| Elanco Animal vs. Viatris | Elanco Animal vs. Catalent | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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