Correlation Between American Express and SGI Enhanced
Can any of the company-specific risk be diversified away by investing in both American Express and SGI Enhanced 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 SGI Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and SGI Enhanced Nasdaq 100, you can compare the effects of market volatilities on American Express and SGI Enhanced 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 SGI Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and SGI Enhanced.
Diversification Opportunities for American Express and SGI Enhanced
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and SGI is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Express and SGI Enhanced Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Enhanced Nasdaq 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 SGI Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Enhanced Nasdaq has no effect on the direction of American Express i.e., American Express and SGI Enhanced go up and down completely randomly.
Pair Corralation between American Express and SGI Enhanced
Considering the 90-day investment horizon American Express is expected to generate 1.13 times more return on investment than SGI Enhanced. However, American Express is 1.13 times more volatile than SGI Enhanced Nasdaq 100. It trades about 0.28 of its potential returns per unit of risk. SGI Enhanced Nasdaq 100 is currently generating about 0.05 per unit of risk. If you would invest 27,043 in American Express on August 30, 2024 and sell it today you would earn a total of 3,382 from holding American Express or generate 12.51% 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. SGI Enhanced Nasdaq 100
Performance |
| Timeline |
| American Express |
| SGI Enhanced Nasdaq |
American Express and SGI Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and SGI Enhanced
The main advantage of trading using opposite American Express and SGI Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, SGI Enhanced 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 SGI Enhanced will offset losses from the drop in SGI Enhanced'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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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