Correlation Between American Express and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both American Express and SPDR Dow 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 SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and SPDR Dow Jones, you can compare the effects of market volatilities on American Express and SPDR Dow 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 SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and SPDR Dow.
Diversification Opportunities for American Express and SPDR Dow
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and SPDR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding American Express and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of American Express i.e., American Express and SPDR Dow go up and down completely randomly.
Pair Corralation between American Express and SPDR Dow
Considering the 90-day investment horizon American Express is expected to under-perform the SPDR Dow. In addition to that, American Express is 1.49 times more volatile than SPDR Dow Jones. It trades about -0.02 of its total potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.33 per unit of volatility. If you would invest 2,310 in SPDR Dow Jones on November 18, 2024 and sell it today you would earn a total of 115.00 from holding SPDR Dow Jones or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. SPDR Dow Jones
Performance |
| Timeline |
| American Express |
| SPDR Dow Jones |
American Express and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and SPDR Dow
The main advantage of trading using opposite American Express and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, SPDR Dow 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 SPDR Dow will offset losses from the drop in SPDR Dow's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart Holdings |
| SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. SPDR SP International | SPDR Dow vs. iShares Cohen Steers |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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