Correlation Between Verizon Communications and American Express
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and American Express, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and American Express.
Diversification Opportunities for Verizon Communications and American Express
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Verizon and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and American Express go up and down completely randomly.
Pair Corralation between Verizon Communications and American Express
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 2.53 times less return on investment than American Express. But when comparing it to its historical volatility, Verizon Communications is 1.23 times less risky than American Express. It trades about 0.06 of its potential returns per unit of risk. American Express is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 23,593 in American Express on September 2, 2024 and sell it today you would earn a total of 6,875 from holding American Express or generate 29.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. American Express
Performance |
| Timeline |
| Verizon Communications |
| American Express |
Verizon Communications and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and American Express
The main advantage of trading using opposite Verizon Communications and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. T Mobile | Verizon Communications vs. Comcast Corp | Verizon Communications vs. Lumen Technologies | Verizon Communications vs. Charter Communications |
| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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