Correlation Between Golden Metal and American Express
Can any of the company-specific risk be diversified away by investing in both Golden Metal 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 Golden Metal and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Metal Resources and American Express Co, you can compare the effects of market volatilities on Golden Metal 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 Golden Metal with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Metal and American Express.
Diversification Opportunities for Golden Metal and American Express
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Golden and American is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Golden Metal 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 Golden Metal Resources 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 Golden Metal i.e., Golden Metal and American Express go up and down completely randomly.
Pair Corralation between Golden Metal and American Express
Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 3.05 times more return on investment than American Express. However, Golden Metal is 3.05 times more volatile than American Express Co. It trades about 0.12 of its potential returns per unit of risk. American Express Co is currently generating about 0.15 per unit of risk. If you would invest 1,025 in Golden Metal Resources on October 10, 2024 and sell it today you would earn a total of 2,125 from holding Golden Metal Resources or generate 207.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.4% |
| Values | Daily Returns |
Golden Metal Resources vs. American Express Co
Performance |
| Timeline |
| Golden Metal Resources |
| American Express |
Golden Metal and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Metal and American Express
The main advantage of trading using opposite Golden Metal and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal 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.| Golden Metal vs. Automatic Data Processing | Golden Metal vs. Alliance Data Systems | Golden Metal vs. Aeorema Communications Plc | Golden Metal vs. Spirent Communications plc |
| American Express vs. Omega Healthcare Investors | American Express vs. Bellevue Healthcare Trust | American Express vs. Abingdon Health Plc | American Express vs. Naturhouse Health SA |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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