Correlation Between UNIVMUSIC GRPADR/050 and American Express

Can any of the company-specific risk be diversified away by investing in both UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR/050 and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UNIVMUSIC GRPADR050 and American Express, you can compare the effects of market volatilities on UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR/050 with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIVMUSIC GRPADR/050 and American Express.

Diversification Opportunities for UNIVMUSIC GRPADR/050 and American Express

-0.29

Correlation Coefficient

UNIVMUSIC GRPADR/050  American Express

Very good diversification

The 3 months correlation between UNIVMUSIC and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding UNIVMUSIC GRPADR050 and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR050 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 UNIVMUSIC GRPADR/050 i.e., UNIVMUSIC GRPADR/050 and American Express go up and down completely randomly.

Pair Corralation between UNIVMUSIC GRPADR/050 and American Express

Assuming the 90 days trading horizon UNIVMUSIC GRPADR050 is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, UNIVMUSIC GRPADR050 is 1.27 times less risky than American Express. The stock trades about -0.04 of its potential returns per unit of risk. The American Express is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  23,213  in American Express on September 3, 2024 and sell it today you would earn a total of  5,802  from holding American Express or generate 24.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

UNIVMUSIC GRPADR050  vs.  American Express

UNIVMUSIC GRPADR/050

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIVMUSIC GRPADR050 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, UNIVMUSIC GRPADR/050 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Express

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, American Express exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIVMUSIC GRPADR/050 and American Express

The main advantage of trading using opposite UNIVMUSIC GRPADR/050 and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIVMUSIC GRPADR/050 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.

The idea behind UNIVMUSIC GRPADR050 and American Express pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.