Correlation Between WSDMTR ERNGS and American Express
Can any of the company-specific risk be diversified away by investing in both WSDMTR ERNGS 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 WSDMTR ERNGS and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WSDMTR ERNGS 500 and American Express, you can compare the effects of market volatilities on WSDMTR ERNGS 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 WSDMTR ERNGS with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of WSDMTR ERNGS and American Express.
Diversification Opportunities for WSDMTR ERNGS and American Express
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WSDMTR and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding WSDMTR ERNGS 500 and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and WSDMTR ERNGS 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 WSDMTR ERNGS 500 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 WSDMTR ERNGS i.e., WSDMTR ERNGS and American Express go up and down completely randomly.
Pair Corralation between WSDMTR ERNGS and American Express
Assuming the 90 days trading horizon WSDMTR ERNGS is expected to generate 2.33 times less return on investment than American Express. But when comparing it to its historical volatility, WSDMTR ERNGS 500 is 2.85 times less risky than American Express. It trades about 0.2 of its potential returns per unit of risk. American Express is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 586,740 in American Express on September 19, 2024 and sell it today you would earn a total of 22,760 from holding American Express or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
WSDMTR ERNGS 500 vs. American Express
Performance |
| Timeline |
| WSDMTR ERNGS 500 |
| American Express |
WSDMTR ERNGS and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WSDMTR ERNGS and American Express
The main advantage of trading using opposite WSDMTR ERNGS and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WSDMTR ERNGS 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.| WSDMTR ERNGS vs. Vanguard Index Funds | WSDMTR ERNGS vs. Vanguard Index Funds | WSDMTR ERNGS vs. SPDR SP 500 | WSDMTR ERNGS vs. Vanguard Bond Index |
| American Express vs. Capital One Financial | American Express vs. Financiera Independencia SAB | American Express vs. The Select Sector | American Express vs. Promotora y Operadora |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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