Correlation Between American Express and New Energy
Can any of the company-specific risk be diversified away by investing in both American Express and New Energy 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 New Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and New Energy Metals, you can compare the effects of market volatilities on American Express and New Energy 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 New Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and New Energy.
Diversification Opportunities for American Express and New Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and New is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding American Express and New Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Energy Metals 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 New Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Energy Metals has no effect on the direction of American Express i.e., American Express and New Energy go up and down completely randomly.
Pair Corralation between American Express and New Energy
Considering the 90-day investment horizon American Express is expected to generate 2.34 times less return on investment than New Energy. But when comparing it to its historical volatility, American Express is 8.95 times less risky than New Energy. It trades about 0.1 of its potential returns per unit of risk. New Energy Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 207.00 in New Energy Metals on September 1, 2024 and sell it today you would lose (176.00) from holding New Energy Metals or give up 85.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. New Energy Metals
Performance |
| Timeline |
| American Express |
| New Energy Metals |
American Express and New Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and New Energy
The main advantage of trading using opposite American Express and New Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, New Energy 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 New Energy will offset losses from the drop in New Energy's long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| New Energy vs. Legacy Education | New Energy vs. Apple Inc | New Energy vs. NVIDIA | New Energy vs. Microsoft |
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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