Correlation Between American Express and Ishares Russell
Can any of the company-specific risk be diversified away by investing in both American Express and Ishares Russell 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 Ishares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Ishares Russell 3000, you can compare the effects of market volatilities on American Express and Ishares Russell 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 Ishares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Ishares Russell.
Diversification Opportunities for American Express and Ishares Russell
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Ishares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Ishares Russell 3000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Russell 3000 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 Ishares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Russell 3000 has no effect on the direction of American Express i.e., American Express and Ishares Russell go up and down completely randomly.
Pair Corralation between American Express and Ishares Russell
Considering the 90-day investment horizon American Express is expected to generate 1.85 times more return on investment than Ishares Russell. However, American Express is 1.85 times more volatile than Ishares Russell 3000. It trades about 0.1 of its potential returns per unit of risk. Ishares Russell 3000 is currently generating about 0.11 per unit of risk. If you would invest 14,316 in American Express on September 13, 2024 and sell it today you would earn a total of 15,714 from holding American Express or generate 109.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Ishares Russell 3000
Performance |
| Timeline |
| American Express |
| Ishares Russell 3000 |
American Express and Ishares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Ishares Russell
The main advantage of trading using opposite American Express and Ishares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Ishares Russell 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 Ishares Russell will offset losses from the drop in Ishares Russell's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Upstart Holdings | American Express vs. Mastercard |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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