Correlation Between American Express and Small Cap
Can any of the company-specific risk be diversified away by investing in both American Express and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Small Cap Special, you can compare the effects of market volatilities on American Express and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Small Cap.
Diversification Opportunities for American Express and Small Cap
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Small is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Special has no effect on the direction of American Express i.e., American Express and Small Cap go up and down completely randomly.
Pair Corralation between American Express and Small Cap
Considering the 90-day investment horizon American Express is expected to generate 1.26 times more return on investment than Small Cap. However, American Express is 1.26 times more volatile than Small Cap Special. It trades about -0.02 of its potential returns per unit of risk. Small Cap Special is currently generating about -0.07 per unit of risk. If you would invest 31,256 in American Express on November 18, 2024 and sell it today you would lose (152.00) from holding American Express or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Small Cap Special
Performance |
| Timeline |
| American Express |
| Small Cap Special |
American Express and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Small Cap
The main advantage of trading using opposite American Express and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart Holdings |
| Small Cap vs. Guidemark Large Cap | Small Cap vs. Tax Managed Large Cap | Small Cap vs. Knights Of Umbus | Small Cap vs. Fidelity Large 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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