Correlation Between American Express and Plumb Balanced
Can any of the company-specific risk be diversified away by investing in both American Express and Plumb Balanced 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 Plumb Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Plumb Balanced, you can compare the effects of market volatilities on American Express and Plumb Balanced 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 Plumb Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Plumb Balanced.
Diversification Opportunities for American Express and Plumb Balanced
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Plumb is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Plumb Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced 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 Plumb Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Balanced has no effect on the direction of American Express i.e., American Express and Plumb Balanced go up and down completely randomly.
Pair Corralation between American Express and Plumb Balanced
Considering the 90-day investment horizon American Express is expected to generate 2.31 times more return on investment than Plumb Balanced. However, American Express is 2.31 times more volatile than Plumb Balanced. It trades about 0.13 of its potential returns per unit of risk. Plumb Balanced is currently generating about 0.09 per unit of risk. If you would invest 23,593 in American Express on September 2, 2024 and sell it today you would earn a total of 6,875 from holding American Express or generate 29.14% 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. Plumb Balanced
Performance |
| Timeline |
| American Express |
| Plumb Balanced |
American Express and Plumb Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Plumb Balanced
The main advantage of trading using opposite American Express and Plumb Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Plumb Balanced 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 Plumb Balanced will offset losses from the drop in Plumb Balanced's long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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