Correlation Between American Express and Protect Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both American Express and Protect Pharmaceutical 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 Protect Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Protect Pharmaceutical, you can compare the effects of market volatilities on American Express and Protect Pharmaceutical 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 Protect Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Protect Pharmaceutical.
Diversification Opportunities for American Express and Protect Pharmaceutical
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Protect is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Protect Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protect Pharmaceutical 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 Protect Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protect Pharmaceutical has no effect on the direction of American Express i.e., American Express and Protect Pharmaceutical go up and down completely randomly.
Pair Corralation between American Express and Protect Pharmaceutical
Considering the 90-day investment horizon American Express is expected to generate 0.2 times more return on investment than Protect Pharmaceutical. However, American Express is 5.06 times less risky than Protect Pharmaceutical. It trades about 0.27 of its potential returns per unit of risk. Protect Pharmaceutical is currently generating about -0.03 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 3,278 from holding American Express or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Protect Pharmaceutical
Performance |
| Timeline |
| American Express |
| Protect Pharmaceutical |
American Express and Protect Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Protect Pharmaceutical
The main advantage of trading using opposite American Express and Protect Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Protect Pharmaceutical 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 Protect Pharmaceutical will offset losses from the drop in Protect Pharmaceutical's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
| Protect Pharmaceutical vs. PayPal Holdings | Protect Pharmaceutical vs. Nasdaq Inc | Protect Pharmaceutical vs. Choice Hotels International | Protect Pharmaceutical 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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