Correlation Between American Express and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both American Express and Innovator Equity 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 Innovator Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Innovator Equity Premium, you can compare the effects of market volatilities on American Express and Innovator Equity 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 Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Innovator Equity.
Diversification Opportunities for American Express and Innovator Equity
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Innovator is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Innovator Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Premium 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Premium has no effect on the direction of American Express i.e., American Express and Innovator Equity go up and down completely randomly.
Pair Corralation between American Express and Innovator Equity
Considering the 90-day investment horizon American Express is expected to generate 42.63 times more return on investment than Innovator Equity. However, American Express is 42.63 times more volatile than Innovator Equity Premium. It trades about 0.29 of its potential returns per unit of risk. Innovator Equity Premium is currently generating about 0.44 per unit of risk. If you would invest 26,735 in American Express on August 26, 2024 and sell it today you would earn a total of 3,395 from holding American Express or generate 12.7% 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. Innovator Equity Premium
Performance |
| Timeline |
| American Express |
| Innovator Equity Premium |
American Express and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Innovator Equity
The main advantage of trading using opposite American Express and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Innovator Equity 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 Innovator Equity will offset losses from the drop in Innovator Equity's long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
| Innovator Equity vs. First Trust Cboe | Innovator Equity vs. FT Cboe Vest | Innovator Equity vs. Innovator SP 500 | Innovator Equity vs. FT Cboe Vest |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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