Correlation Between American Express and Sage Group
Can any of the company-specific risk be diversified away by investing in both American Express and Sage Group 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 American Express and Sage Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express Co and Sage Group PLC, you can compare the effects of market volatilities on American Express and Sage Group 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 American Express with a short position of Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Sage Group.
Diversification Opportunities for American Express and Sage Group
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Sage is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC and American Express 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 American Express Co are associated (or correlated) with Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of American Express i.e., American Express and Sage Group go up and down completely randomly.
Pair Corralation between American Express and Sage Group
Assuming the 90 days trading horizon American Express Co is expected to generate 1.01 times more return on investment than Sage Group. However, American Express is 1.01 times more volatile than Sage Group PLC. It trades about 0.1 of its potential returns per unit of risk. Sage Group PLC is currently generating about 0.08 per unit of risk. If you would invest 14,287 in American Express Co on September 23, 2024 and sell it today you would earn a total of 15,681 from holding American Express Co or generate 109.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.6% |
Values | Daily Returns |
American Express Co vs. Sage Group PLC
Performance |
Timeline |
American Express |
Sage Group PLC |
American Express and Sage Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and Sage Group
The main advantage of trading using opposite American Express and Sage Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Sage Group 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 Sage Group will offset losses from the drop in Sage Group's long position.American Express vs. Uniper SE | American Express vs. Mulberry Group PLC | American Express vs. London Security Plc | American Express vs. Triad Group PLC |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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