Correlation Between American Express and Vanguard Quality
Can any of the company-specific risk be diversified away by investing in both American Express and Vanguard Quality 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 Vanguard Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Vanguard Quality Factor, you can compare the effects of market volatilities on American Express and Vanguard Quality 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 Vanguard Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Vanguard Quality.
Diversification Opportunities for American Express and Vanguard Quality
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Vanguard Quality Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Quality Factor 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 Vanguard Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Quality Factor has no effect on the direction of American Express i.e., American Express and Vanguard Quality go up and down completely randomly.
Pair Corralation between American Express and Vanguard Quality
Considering the 90-day investment horizon American Express is expected to generate 1.82 times more return on investment than Vanguard Quality. However, American Express is 1.82 times more volatile than Vanguard Quality Factor. It trades about 0.29 of its potential returns per unit of risk. Vanguard Quality Factor is currently generating about 0.21 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 3,410 from holding American Express or generate 12.56% 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. Vanguard Quality Factor
Performance |
| Timeline |
| American Express |
| Vanguard Quality Factor |
American Express and Vanguard Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Vanguard Quality
The main advantage of trading using opposite American Express and Vanguard Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Vanguard Quality 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 Vanguard Quality will offset losses from the drop in Vanguard Quality's long position.| American Express vs. Orix Corp Ads | American Express vs. Medallion Financial Corp | American Express vs. Oportun Financial Corp | American Express vs. SLM Corp Pb |
| Vanguard Quality vs. Vanguard Mid Cap Index | Vanguard Quality vs. iShares Core SP | Vanguard Quality vs. SPDR SP MIDCAP | Vanguard Quality vs. Vanguard SP Mid Cap |
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.
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