Correlation Between American Express and Fidelity Covington
Can any of the company-specific risk be diversified away by investing in both American Express and Fidelity Covington 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 Fidelity Covington into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Fidelity Covington Trust, you can compare the effects of market volatilities on American Express and Fidelity Covington 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 Fidelity Covington. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Fidelity Covington.
Diversification Opportunities for American Express and Fidelity Covington
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Fidelity is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of American Express i.e., American Express and Fidelity Covington go up and down completely randomly.
Pair Corralation between American Express and Fidelity Covington
Considering the 90-day investment horizon American Express is expected to generate 1.62 times more return on investment than Fidelity Covington. However, American Express is 1.62 times more volatile than Fidelity Covington Trust. It trades about 0.13 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.11 per unit of risk. If you would invest 23,556 in American Express on September 1, 2024 and sell it today you would earn a total of 6,912 from holding American Express or generate 29.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Fidelity Covington Trust
Performance |
| Timeline |
| American Express |
| Fidelity Covington Trust |
American Express and Fidelity Covington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Fidelity Covington
The main advantage of trading using opposite American Express and Fidelity Covington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Fidelity Covington 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 Fidelity Covington will offset losses from the drop in Fidelity Covington's long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| Fidelity Covington vs. Fidelity MSCI Financials | Fidelity Covington vs. Fidelity MSCI Consumer | Fidelity Covington vs. Fidelity MSCI Consumer | Fidelity Covington vs. Fidelity MSCI Industrials |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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