Correlation Between American Express and Santos
Can any of the company-specific risk be diversified away by investing in both American Express and Santos 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 Santos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Santos, you can compare the effects of market volatilities on American Express and Santos 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 Santos. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Santos.
Diversification Opportunities for American Express and Santos
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Santos is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of American Express i.e., American Express and Santos go up and down completely randomly.
Pair Corralation between American Express and Santos
Considering the 90-day investment horizon American Express is expected to generate 0.62 times more return on investment than Santos. However, American Express is 1.61 times less risky than Santos. It trades about 0.3 of its potential returns per unit of risk. Santos is currently generating about 0.04 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 | 95.45% |
| Values | Daily Returns |
American Express vs. Santos
Performance |
| Timeline |
| American Express |
| Santos |
American Express and Santos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Santos
The main advantage of trading using opposite American Express and Santos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Santos 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 Santos will offset losses from the drop in Santos' long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| Santos vs. Permian Resources | Santos vs. Devon Energy | Santos vs. EOG Resources | Santos vs. Coterra Energy |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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