Correlation Between American Express and Visa
Can any of the company-specific risk be diversified away by investing in both American Express and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Visa Class A, you can compare the effects of market volatilities on American Express and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Visa.
Diversification Opportunities for American Express and Visa
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Visa is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of American Express i.e., American Express and Visa go up and down completely randomly.
Pair Corralation between American Express and Visa
Considering the 90-day investment horizon American Express is expected to generate 1.5 times more return on investment than Visa. However, American Express is 1.5 times more volatile than Visa Class A. It trades about 0.09 of its potential returns per unit of risk. Visa Class A is currently generating about 0.08 per unit of risk. If you would invest 16,832 in American Express on October 19, 2024 and sell it today you would earn a total of 14,424 from holding American Express or generate 85.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Visa Class A
Performance |
| Timeline |
| American Express |
| Visa Class A |
American Express and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Visa
The main advantage of trading using opposite American Express and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| American Express vs. Upstart Holdings | American Express vs. Affirm Holdings | American Express vs. Lucid Group | American Express vs. Palantir Technologies Class |
| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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