Correlation Between American Express and Industrial Select
Can any of the company-specific risk be diversified away by investing in both American Express and Industrial Select 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 Industrial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Industrial Select Sector, you can compare the effects of market volatilities on American Express and Industrial Select 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 Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Industrial Select.
Diversification Opportunities for American Express and Industrial Select
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Industrial is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Select Sector 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 Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of American Express i.e., American Express and Industrial Select go up and down completely randomly.
Pair Corralation between American Express and Industrial Select
Considering the 90-day investment horizon American Express is expected to generate 1.72 times more return on investment than Industrial Select. However, American Express is 1.72 times more volatile than Industrial Select Sector. It trades about 0.09 of its potential returns per unit of risk. Industrial Select Sector is currently generating about 0.08 per unit of risk. If you would invest 16,961 in American Express on November 19, 2024 and sell it today you would earn a total of 14,143 from holding American Express or generate 83.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Industrial Select Sector
Performance |
| Timeline |
| American Express |
| Industrial Select Sector |
American Express and Industrial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Industrial Select
The main advantage of trading using opposite American Express and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Industrial Select 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 Industrial Select will offset losses from the drop in Industrial Select'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 |
| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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