Correlation Between US Bancorp and American Express
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and American Express, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and American Express.
Diversification Opportunities for US Bancorp and American Express
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USB and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and American Express go up and down completely randomly.
Pair Corralation between US Bancorp and American Express
Assuming the 90 days trading horizon US Bancorp is expected to generate 1.28 times less return on investment than American Express. In addition to that, US Bancorp is 1.08 times more volatile than American Express. It trades about 0.12 of its total potential returns per unit of risk. American Express is currently generating about 0.17 per unit of volatility. If you would invest 366,276 in American Express on August 25, 2024 and sell it today you would earn a total of 248,724 from holding American Express or generate 67.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.47% |
| Values | Daily Returns |
US Bancorp vs. American Express
Performance |
| Timeline |
| US Bancorp |
| American Express |
US Bancorp and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and American Express
The main advantage of trading using opposite US Bancorp and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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.| US Bancorp vs. Glencore plc | US Bancorp vs. iShares Global Timber | US Bancorp vs. Vanguard World | US Bancorp vs. iShares Trust |
| American Express vs. Visa Inc | American Express vs. Mastercard Incorporated | American Express vs. Gentera SAB de | American Express vs. Unifin Financiera S |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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