Correlation Between American Express and Simplify Equity
Can any of the company-specific risk be diversified away by investing in both American Express and Simplify Equity 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 Simplify Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Simplify Equity PLUS, you can compare the effects of market volatilities on American Express and Simplify Equity 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 Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Simplify Equity.
Diversification Opportunities for American Express and Simplify Equity
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Simplify is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of American Express i.e., American Express and Simplify Equity go up and down completely randomly.
Pair Corralation between American Express and Simplify Equity
Considering the 90-day investment horizon American Express is expected to generate 1.83 times more return on investment than Simplify Equity. However, American Express is 1.83 times more volatile than Simplify Equity PLUS. It trades about 0.17 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.14 per unit of risk. If you would invest 27,049 in American Express on August 29, 2024 and sell it today you would earn a total of 3,392 from holding American Express or generate 12.54% 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. Simplify Equity PLUS
Performance |
| Timeline |
| American Express |
| Simplify Equity PLUS |
American Express and Simplify Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Simplify Equity
The main advantage of trading using opposite American Express and Simplify Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Simplify Equity 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 Simplify Equity will offset losses from the drop in Simplify Equity's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
| Simplify Equity vs. JPMorgan BetaBuilders International | Simplify Equity vs. JPMorgan Core Plus | Simplify Equity vs. JPMorgan BetaBuilders Canada | Simplify Equity vs. JPMorgan Emerging Markets |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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