Correlation Between American Express and Pharos Energy
Can any of the company-specific risk be diversified away by investing in both American Express and Pharos Energy 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 Pharos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Pharos Energy plc, you can compare the effects of market volatilities on American Express and Pharos Energy 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 Pharos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Pharos Energy.
Diversification Opportunities for American Express and Pharos Energy
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Pharos is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Pharos Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharos Energy plc 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 Pharos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharos Energy plc has no effect on the direction of American Express i.e., American Express and Pharos Energy go up and down completely randomly.
Pair Corralation between American Express and Pharos Energy
Considering the 90-day investment horizon American Express is expected to generate 0.46 times more return on investment than Pharos Energy. However, American Express is 2.17 times less risky than Pharos Energy. It trades about 0.3 of its potential returns per unit of risk. Pharos Energy plc is currently generating about -0.22 per unit of risk. If you would invest 27,008 in American Express on September 1, 2024 and sell it today you would earn a total of 3,460 from holding American Express or generate 12.81% 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. Pharos Energy plc
Performance |
| Timeline |
| American Express |
| Pharos Energy plc |
American Express and Pharos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Pharos Energy
The main advantage of trading using opposite American Express and Pharos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Pharos Energy 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 Pharos Energy will offset losses from the drop in Pharos Energy's long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| Pharos Energy vs. San Leon Energy | Pharos Energy vs. Enwell Energy plc | Pharos Energy vs. Dno ASA | Pharos Energy vs. PetroShale |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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