Correlation Between American Express and Innovator
Can any of the company-specific risk be diversified away by investing in both American Express and Innovator 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 Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Innovator SP 500, you can compare the effects of market volatilities on American Express and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Innovator.
Diversification Opportunities for American Express and Innovator
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Innovator is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of American Express i.e., American Express and Innovator go up and down completely randomly.
Pair Corralation between American Express and Innovator
Considering the 90-day investment horizon American Express is expected to generate 4.52 times more return on investment than Innovator. However, American Express is 4.52 times more volatile than Innovator SP 500. It trades about 0.27 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.18 per unit of risk. If you would invest 27,147 in American Express on August 29, 2024 and sell it today you would earn a total of 3,278 from holding American Express or generate 12.07% 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. Innovator SP 500
Performance |
| Timeline |
| American Express |
| Innovator SP 500 |
American Express and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Innovator
The main advantage of trading using opposite American Express and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
| Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |