Correlation Between American Express and Overstockcom
Can any of the company-specific risk be diversified away by investing in both American Express and Overstockcom 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 Overstockcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Overstockcom, you can compare the effects of market volatilities on American Express and Overstockcom 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 Overstockcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Overstockcom.
Diversification Opportunities for American Express and Overstockcom
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Overstockcom is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Overstockcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstockcom 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 Overstockcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstockcom has no effect on the direction of American Express i.e., American Express and Overstockcom go up and down completely randomly.
Pair Corralation between American Express and Overstockcom
Considering the 90-day investment horizon American Express is expected to generate 7.4 times less return on investment than Overstockcom. But when comparing it to its historical volatility, American Express is 4.17 times less risky than Overstockcom. It trades about 0.12 of its potential returns per unit of risk. Overstockcom is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,184 in Overstockcom on August 31, 2024 and sell it today you would earn a total of 908.00 from holding Overstockcom or generate 41.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 8.56% |
| Values | Daily Returns |
American Express vs. Overstockcom
Performance |
| Timeline |
| American Express |
| Overstockcom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Express and Overstockcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Overstockcom
The main advantage of trading using opposite American Express and Overstockcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Overstockcom 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 Overstockcom will offset losses from the drop in Overstockcom's long position.| American Express vs. Visa Class A | American Express vs. RLJ Lodging Trust | American Express vs. Aquagold International | American Express vs. Stepstone Group |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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