Correlation Between American Express and Northern Large
Can any of the company-specific risk be diversified away by investing in both American Express and Northern Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on American Express and Northern Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Northern Large.
Diversification Opportunities for American Express and Northern Large
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Northern is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Northern Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Large Cap has no effect on the direction of American Express i.e., American Express and Northern Large go up and down completely randomly.
Pair Corralation between American Express and Northern Large
Considering the 90-day investment horizon American Express is expected to generate 2.08 times more return on investment than Northern Large. However, American Express is 2.08 times more volatile than Northern Large Cap. It trades about 0.27 of its potential returns per unit of risk. Northern Large Cap is currently generating about 0.21 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 Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Express vs. Northern Large Cap
Performance |
| Timeline |
| American Express |
| Northern Large Cap |
American Express and Northern Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Northern Large
The main advantage of trading using opposite American Express and Northern Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Northern Large 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 Large will offset losses from the drop in Northern Large'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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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