Correlation Between Amazon and American Express
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and American Express Co, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and American Express.
Diversification Opportunities for Amazon and American Express
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and American Express go up and down completely randomly.
Pair Corralation between Amazon and American Express
Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.66 times more return on investment than American Express. However, Amazon is 1.66 times more volatile than American Express Co. It trades about 0.12 of its potential returns per unit of risk. American Express Co is currently generating about 0.13 per unit of risk. If you would invest 19,250 in Amazon Inc on September 23, 2024 and sell it today you would earn a total of 3,300 from holding Amazon Inc or generate 17.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Amazon Inc vs. American Express Co
Performance |
Timeline |
Amazon Inc |
American Express |
Amazon and American Express Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and American Express
The main advantage of trading using opposite Amazon and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.Amazon vs. Toyota Motor Corp | Amazon vs. SoftBank Group Corp | Amazon vs. OTP Bank Nyrt | Amazon vs. Freeport McMoRan |
American Express vs. Uniper SE | American Express vs. Mulberry Group PLC | American Express vs. London Security Plc | American Express vs. Triad Group PLC |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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