Correlation Between Banco De and American Express
Can any of the company-specific risk be diversified away by investing in both Banco De 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 Banco De and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco de Valores and American Express Co, you can compare the effects of market volatilities on Banco De 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 Banco De with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and American Express.
Diversification Opportunities for Banco De and American Express
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Banco and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Valores and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Banco De 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 Banco de Valores 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 Banco De i.e., Banco De and American Express go up and down completely randomly.
Pair Corralation between Banco De and American Express
Assuming the 90 days trading horizon Banco de Valores is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, Banco de Valores is 1.73 times less risky than American Express. The stock trades about -0.16 of its potential returns per unit of risk. The American Express Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,327,495 in American Express Co on November 2, 2024 and sell it today you would earn a total of 197,505 from holding American Express Co or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco de Valores vs. American Express Co
Performance |
| Timeline |
| Banco de Valores |
| American Express |
Banco De and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco De and American Express
The main advantage of trading using opposite Banco De and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco De 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.| Banco De vs. Harmony Gold Mining | Banco De vs. Agrometal SAI | Banco De vs. Transportadora de Gas | Banco De vs. Telecom Argentina |
| American Express vs. International Business Machines | American Express vs. Transportadora de Gas | American Express vs. Agrometal SAI | American Express vs. Grimoldi 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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