Correlation Between American Express and Boss Resources

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

By analyzing existing cross correlation between American Express and Boss Resources, you can compare the effects of market volatilities on American Express and Boss Resources 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 Boss Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Boss Resources.

Diversification Opportunities for American Express and Boss Resources

-0.36

Correlation Coefficient

American Express  Boss Resources

Very good diversification

The 3 months correlation between American and Boss is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Boss Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boss Resources 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 are associated (or correlated) with Boss Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boss Resources has no effect on the direction of American Express i.e., American Express and Boss Resources go up and down completely randomly.

Pair Corralation between American Express and Boss Resources

Considering the 90-day investment horizon American Express is expected to generate 0.45 times more return on investment than Boss Resources. However, American Express is 2.24 times less risky than Boss Resources. It trades about 0.17 of its potential returns per unit of risk. Boss Resources is currently generating about -0.06 per unit of risk. If you would invest  25,833  in American Express on September 13, 2024 and sell it today you would earn a total of  4,401  from holding American Express or generate 17.04% return on investment over 90 days.

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

American Express  vs.  Boss Resources

American Express

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Boss Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boss Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Express and Boss Resources

The main advantage of trading using opposite American Express and Boss Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Boss Resources 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 Boss Resources will offset losses from the drop in Boss Resources' long position.

The idea behind American Express and Boss Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.