Correlation Between American Express and IShares Thematic
Can any of the company-specific risk be diversified away by investing in both American Express and IShares Thematic 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 IShares Thematic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and iShares Thematic Rotation, you can compare the effects of market volatilities on American Express and IShares Thematic 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 IShares Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and IShares Thematic.
Diversification Opportunities for American Express and IShares Thematic
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Express and iShares Thematic Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Thematic Rotation 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 IShares Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Thematic Rotation has no effect on the direction of American Express i.e., American Express and IShares Thematic go up and down completely randomly.
Pair Corralation between American Express and IShares Thematic
Considering the 90-day investment horizon American Express is expected to generate 1.61 times more return on investment than IShares Thematic. However, American Express is 1.61 times more volatile than iShares Thematic Rotation. It trades about 0.17 of its potential returns per unit of risk. iShares Thematic Rotation is currently generating about 0.1 per unit of risk. If you would invest 28,851 in American Express on September 13, 2024 and sell it today you would earn a total of 1,179 from holding American Express or generate 4.09% 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. iShares Thematic Rotation
Performance |
| Timeline |
| American Express |
| iShares Thematic Rotation |
American Express and IShares Thematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and IShares Thematic
The main advantage of trading using opposite American Express and IShares Thematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, IShares Thematic 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 IShares Thematic will offset losses from the drop in IShares Thematic's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Upstart Holdings | American Express vs. Mastercard |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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