Correlation Between American Express and Northern International
Can any of the company-specific risk be diversified away by investing in both American Express and Northern International 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 Northern International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Northern International Equity, you can compare the effects of market volatilities on American Express and Northern International 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 Northern International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Northern International.
Diversification Opportunities for American Express and Northern International
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and NORTHERN is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Northern International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern International 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 Northern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern International has no effect on the direction of American Express i.e., American Express and Northern International go up and down completely randomly.
Pair Corralation between American Express and Northern International
Considering the 90-day investment horizon American Express is expected to generate 2.61 times more return on investment than Northern International. However, American Express is 2.61 times more volatile than Northern International Equity. It trades about 0.27 of its potential returns per unit of risk. Northern International Equity is currently generating about -0.14 per unit of risk. If you would invest 27,147 in American Express on August 29, 2024 and sell it today you would earn a total of 3,294 from holding American Express or generate 12.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Northern International Equity
Performance |
| Timeline |
| American Express |
| Northern International |
American Express and Northern International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Northern International
The main advantage of trading using opposite American Express and Northern International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Northern International 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 Northern International will offset losses from the drop in Northern International's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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