Correlation Between Compania and American Express
Can any of the company-specific risk be diversified away by investing in both Compania 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 Compania and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Transporte and American Express Co, you can compare the effects of market volatilities on Compania 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 Compania with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and American Express.
Diversification Opportunities for Compania and American Express
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Compania and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Compania 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 Compania de Transporte 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 Compania i.e., Compania and American Express go up and down completely randomly.
Pair Corralation between Compania and American Express
Assuming the 90 days trading horizon Compania de Transporte is expected to generate 1.64 times more return on investment than American Express. However, Compania is 1.64 times more volatile than American Express Co. It trades about 0.16 of its potential returns per unit of risk. American Express Co is currently generating about 0.17 per unit of risk. If you would invest 15,175 in Compania de Transporte on August 28, 2024 and sell it today you would earn a total of 204,825 from holding Compania de Transporte or generate 1349.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Transporte vs. American Express Co
Performance |
| Timeline |
| Compania de Transporte |
| American Express |
Compania and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and American Express
The main advantage of trading using opposite Compania and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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.| Compania vs. Transportadora de Gas | Compania vs. Harmony Gold Mining | Compania vs. Telecom Argentina | Compania vs. Agrometal SAI |
| American Express vs. Pampa Energia SA | American Express vs. United States Steel | American Express vs. Pfizer Inc | American Express vs. Distribuidora de Gas |
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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