Correlation Between LBG Media and American Express
Can any of the company-specific risk be diversified away by investing in both LBG Media 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 LBG Media and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LBG Media PLC and American Express Co, you can compare the effects of market volatilities on LBG Media 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 LBG Media with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of LBG Media and American Express.
Diversification Opportunities for LBG Media and American Express
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LBG and American is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding LBG Media PLC and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and LBG Media 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 LBG Media PLC 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 LBG Media i.e., LBG Media and American Express go up and down completely randomly.
Pair Corralation between LBG Media and American Express
Assuming the 90 days trading horizon LBG Media PLC is expected to under-perform the American Express. In addition to that, LBG Media is 1.11 times more volatile than American Express Co. It trades about -0.07 of its total potential returns per unit of risk. American Express Co is currently generating about 0.22 per unit of volatility. If you would invest 30,158 in American Express Co on November 6, 2024 and sell it today you would earn a total of 1,897 from holding American Express Co or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LBG Media PLC vs. American Express Co
Performance |
| Timeline |
| LBG Media PLC |
| American Express |
LBG Media and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LBG Media and American Express
The main advantage of trading using opposite LBG Media and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LBG Media 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.| LBG Media vs. Playtech Plc | LBG Media vs. International Biotechnology Trust | LBG Media vs. Travel Leisure Co | LBG Media vs. Southwest Airlines Co |
| American Express vs. Xeros Technology Group | American Express vs. DFS Furniture PLC | American Express vs. Infrastrutture Wireless Italiane | American Express vs. International Biotechnology Trust |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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