Correlation Between American Express and Prysmian SpA
Can any of the company-specific risk be diversified away by investing in both American Express and Prysmian SpA 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 Prysmian SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Prysmian SpA, you can compare the effects of market volatilities on American Express and Prysmian SpA 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 Prysmian SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Prysmian SpA.
Diversification Opportunities for American Express and Prysmian SpA
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Prysmian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Prysmian SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prysmian SpA 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 Prysmian SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prysmian SpA has no effect on the direction of American Express i.e., American Express and Prysmian SpA go up and down completely randomly.
Pair Corralation between American Express and Prysmian SpA
Considering the 90-day investment horizon American Express is expected to generate 0.61 times more return on investment than Prysmian SpA. However, American Express is 1.63 times less risky than Prysmian SpA. It trades about 0.16 of its potential returns per unit of risk. Prysmian SpA is currently generating about -0.01 per unit of risk. If you would invest 25,916 in American Express on August 29, 2024 and sell it today you would earn a total of 4,641 from holding American Express or generate 17.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Prysmian SpA
Performance |
| Timeline |
| American Express |
| Prysmian SpA |
American Express and Prysmian SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Prysmian SpA
The main advantage of trading using opposite American Express and Prysmian SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Prysmian SpA 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 Prysmian SpA will offset losses from the drop in Prysmian SpA'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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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