Correlation Between American Express and TOTVS SA
Can any of the company-specific risk be diversified away by investing in both American Express and TOTVS SA 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 TOTVS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and TOTVS SA, you can compare the effects of market volatilities on American Express and TOTVS SA 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 TOTVS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and TOTVS SA.
Diversification Opportunities for American Express and TOTVS SA
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and TOTVS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Express and TOTVS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTVS SA 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 TOTVS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTVS SA has no effect on the direction of American Express i.e., American Express and TOTVS SA go up and down completely randomly.
Pair Corralation between American Express and TOTVS SA
Assuming the 90 days trading horizon American Express is expected to generate 63.84 times less return on investment than TOTVS SA. But when comparing it to its historical volatility, American Express is 1.71 times less risky than TOTVS SA. It trades about 0.01 of its potential returns per unit of risk. TOTVS SA is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 2,638 in TOTVS SA on November 2, 2024 and sell it today you would earn a total of 768.00 from holding TOTVS SA or generate 29.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. TOTVS SA
Performance |
| Timeline |
| American Express |
| TOTVS SA |
American Express and TOTVS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and TOTVS SA
The main advantage of trading using opposite American Express and TOTVS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, TOTVS SA 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 TOTVS SA will offset losses from the drop in TOTVS SA's long position.| American Express vs. Check Point Software | American Express vs. Molson Coors Beverage | American Express vs. Micron Technology | American Express vs. Nordon Indstrias Metalrgicas |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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