Correlation Between American Express and VMG Consumer
Can any of the company-specific risk be diversified away by investing in both American Express and VMG Consumer 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 VMG Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and VMG Consumer Acquisition, you can compare the effects of market volatilities on American Express and VMG Consumer 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 VMG Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and VMG Consumer.
Diversification Opportunities for American Express and VMG Consumer
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and VMG is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Express and VMG Consumer Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMG Consumer Acquisition 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 VMG Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMG Consumer Acquisition has no effect on the direction of American Express i.e., American Express and VMG Consumer go up and down completely randomly.
Pair Corralation between American Express and VMG Consumer
If you would invest 27,043 in American Express on August 30, 2024 and sell it today you would earn a total of 3,382 from holding American Express or generate 12.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.55% |
| Values | Daily Returns |
American Express vs. VMG Consumer Acquisition
Performance |
| Timeline |
| American Express |
| VMG Consumer Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Express and VMG Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and VMG Consumer
The main advantage of trading using opposite American Express and VMG Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, VMG Consumer 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 VMG Consumer will offset losses from the drop in VMG Consumer's long position.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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