Correlation Between American Express and Freedom Holding
Can any of the company-specific risk be diversified away by investing in both American Express and Freedom Holding 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 Freedom Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Freedom Holding Corp, you can compare the effects of market volatilities on American Express and Freedom Holding 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 Freedom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Freedom Holding.
Diversification Opportunities for American Express and Freedom Holding
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Freedom is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of American Express i.e., American Express and Freedom Holding go up and down completely randomly.
Pair Corralation between American Express and Freedom Holding
Considering the 90-day investment horizon American Express is expected to generate 1.34 times less return on investment than Freedom Holding. But when comparing it to its historical volatility, American Express is 1.15 times less risky than Freedom Holding. It trades about 0.19 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 10,577 in Freedom Holding Corp on August 24, 2024 and sell it today you would earn a total of 1,153 from holding Freedom Holding Corp or generate 10.9% 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. Freedom Holding Corp
Performance |
| Timeline |
| American Express |
| Freedom Holding Corp |
American Express and Freedom Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Freedom Holding
The main advantage of trading using opposite American Express and Freedom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Freedom Holding 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 Freedom Holding will offset losses from the drop in Freedom Holding's long position.| American Express vs. Small Cap Core | American Express vs. Morningstar Unconstrained Allocation | American Express vs. Mutual Of America | American Express vs. Ep Emerging Markets |
| Freedom Holding vs. SCOR PK | Freedom Holding vs. Aquagold International | Freedom Holding vs. Small Cap Core | Freedom Holding vs. Morningstar Unconstrained Allocation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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