Correlation Between American Express and Vertiv Holdings
Can any of the company-specific risk be diversified away by investing in both American Express and Vertiv Holdings 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 Vertiv Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Vertiv Holdings Co, you can compare the effects of market volatilities on American Express and Vertiv Holdings 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 Vertiv Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Vertiv Holdings.
Diversification Opportunities for American Express and Vertiv Holdings
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Vertiv is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Vertiv Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertiv Holdings 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 Vertiv Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertiv Holdings has no effect on the direction of American Express i.e., American Express and Vertiv Holdings go up and down completely randomly.
Pair Corralation between American Express and Vertiv Holdings
Considering the 90-day investment horizon American Express is expected to under-perform the Vertiv Holdings. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 3.72 times less risky than Vertiv Holdings. The stock trades about -0.31 of its potential returns per unit of risk. The Vertiv Holdings Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 10,260 in Vertiv Holdings Co on November 27, 2024 and sell it today you would lose (661.00) from holding Vertiv Holdings Co or give up 6.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Vertiv Holdings Co
Performance |
| Timeline |
| American Express |
| Vertiv Holdings |
American Express and Vertiv Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Vertiv Holdings
The main advantage of trading using opposite American Express and Vertiv Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Vertiv Holdings 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 Vertiv Holdings will offset losses from the drop in Vertiv Holdings' long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart Holdings |
| Vertiv Holdings vs. nVent Electric PLC | Vertiv Holdings vs. Hubbell | Vertiv Holdings vs. Advanced Energy Industries | Vertiv Holdings vs. Energizer 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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