Correlation Between American Express and State Street
Can any of the company-specific risk be diversified away by investing in both American Express and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and State Street Master, you can compare the effects of market volatilities on American Express and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and State Street.
Diversification Opportunities for American Express and State Street
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and State is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Express and State Street Master in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Master 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Master has no effect on the direction of American Express i.e., American Express and State Street go up and down completely randomly.
Pair Corralation between American Express and State Street
If you would invest 29,810 in American Express on October 23, 2024 and sell it today you would earn a total of 1,446 from holding American Express or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Express vs. State Street Master
Performance |
| Timeline |
| American Express |
| State Street Master |
American Express and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and State Street
The main advantage of trading using opposite American Express and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. MSCI ACWI exAUCONSUMER | American Express vs. Sycamore Entmt Grp |
| State Street vs. Vanguard Total Stock | State Street vs. Vanguard 500 Index | State Street vs. Vanguard Total Stock | State Street vs. Vanguard Total Stock |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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