Correlation Between Dow Jones and American Express
Can any of the company-specific risk be diversified away by investing in both Dow Jones and American Express 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 Dow Jones and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and American Express, you can compare the effects of market volatilities on Dow Jones and American Express 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 Dow Jones with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and American Express.
Diversification Opportunities for Dow Jones and American Express
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Dow Jones i.e., Dow Jones and American Express go up and down completely randomly.
Pair Corralation between Dow Jones and American Express
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.43 times less return on investment than American Express. But when comparing it to its historical volatility, Dow Jones Industrial is 2.19 times less risky than American Express. It trades about 0.13 of its potential returns per unit of risk. American Express is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 25,322 in American Express on August 24, 2024 and sell it today you would earn a total of 3,978 from holding American Express or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. American Express
Performance |
| Timeline |
Dow Jones and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
American Express
Pair trading matchups for American Express
Pair Trading with Dow Jones and American Express
The main advantage of trading using opposite Dow Jones and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. SoFi Technologies | American Express vs. Coca Cola Consolidated |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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