Correlation Between American Express and SPDR SP
Can any of the company-specific risk be diversified away by investing in both American Express and SPDR SP 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 SP 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 SP Kensho, you can compare the effects of market volatilities on American Express and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and SPDR SP.
Diversification Opportunities for American Express and SPDR SP
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Express and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of American Express i.e., American Express and SPDR SP go up and down completely randomly.
Pair Corralation between American Express and SPDR SP
Considering the 90-day investment horizon American Express is expected to generate 1.2 times more return on investment than SPDR SP. However, American Express is 1.2 times more volatile than SPDR SP Kensho. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.04 per unit of risk. If you would invest 21,752 in American Express on August 27, 2024 and sell it today you would earn a total of 8,378 from holding American Express or generate 38.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. SPDR SP Kensho
Performance |
| Timeline |
| American Express |
| SPDR SP Kensho |
American Express and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and SPDR SP
The main advantage of trading using opposite American Express and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
| SPDR SP vs. SPDR SP Kensho | SPDR SP vs. SPDR SP Kensho | SPDR SP vs. SPDR Kensho New | SPDR SP vs. First Trust NASDAQ |
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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