Correlation Between American Express and Hafnia
Can any of the company-specific risk be diversified away by investing in both American Express and Hafnia 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 Hafnia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Hafnia Limited, you can compare the effects of market volatilities on American Express and Hafnia 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 Hafnia. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Hafnia.
Diversification Opportunities for American Express and Hafnia
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Hafnia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of American Express i.e., American Express and Hafnia go up and down completely randomly.
Pair Corralation between American Express and Hafnia
Considering the 90-day investment horizon American Express is expected to generate 1.5 times less return on investment than Hafnia. But when comparing it to its historical volatility, American Express is 1.66 times less risky than Hafnia. It trades about 0.1 of its potential returns per unit of risk. Hafnia Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 387.00 in Hafnia Limited on August 31, 2024 and sell it today you would earn a total of 443.00 from holding Hafnia Limited or generate 114.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 74.9% |
| Values | Daily Returns |
American Express vs. Hafnia Limited
Performance |
| Timeline |
| American Express |
| Hafnia Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Express and Hafnia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Hafnia
The main advantage of trading using opposite American Express and Hafnia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Hafnia 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 Hafnia will offset losses from the drop in Hafnia's long position.| American Express vs. Visa Class A | American Express vs. RLJ Lodging Trust | American Express vs. Aquagold International | American Express vs. Stepstone Group |
| Hafnia vs. MGIC Investment Corp | Hafnia vs. Aegon NV ADR | Hafnia vs. Assurant | Hafnia vs. Kinsale Capital Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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