Correlation Between American Express and International Petroleum
Can any of the company-specific risk be diversified away by investing in both American Express and International Petroleum 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 International Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and International Petroleum, you can compare the effects of market volatilities on American Express and International Petroleum 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 International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and International Petroleum.
Diversification Opportunities for American Express and International Petroleum
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and International is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Express and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum 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 International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of American Express i.e., American Express and International Petroleum go up and down completely randomly.
Pair Corralation between American Express and International Petroleum
Considering the 90-day investment horizon American Express is expected to generate 0.83 times more return on investment than International Petroleum. However, American Express is 1.21 times less risky than International Petroleum. It trades about 0.32 of its potential returns per unit of risk. International Petroleum is currently generating about -0.04 per unit of risk. If you would invest 27,019 in American Express on September 3, 2024 and sell it today you would earn a total of 3,449 from holding American Express or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. International Petroleum
Performance |
| Timeline |
| American Express |
| International Petroleum |
American Express and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and International Petroleum
The main advantage of trading using opposite American Express and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| American Express vs. Highway Holdings Limited | American Express vs. QCR Holdings | American Express vs. Partner Communications | American Express vs. Acumen Pharmaceuticals |
| International Petroleum vs. 1st NRG Corp | International Petroleum vs. Otto Energy Limited | International Petroleum vs. Razor Energy Corp | International Petroleum vs. Prospera Energy |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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