Correlation Between American Express and Crown Point

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

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

Diversification Opportunities for American Express and Crown Point

-0.77

Correlation Coefficient

American Express  Crown Point

Pay attention - limited upside

The 3 months correlation between American and Crown is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Crown Point Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Point Energy 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 Crown Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Point Energy has no effect on the direction of American Express i.e., American Express and Crown Point go up and down completely randomly.

Pair Corralation between American Express and Crown Point

Considering the 90-day investment horizon American Express is expected to generate 0.28 times more return on investment than Crown Point. However, American Express is 3.63 times less risky than Crown Point. It trades about 0.12 of its potential returns per unit of risk. Crown Point Energy is currently generating about -0.01 per unit of risk. If you would invest  16,785  in American Express on August 31, 2024 and sell it today you would earn a total of  13,683  from holding American Express or generate 81.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.73%
Values	Daily Returns

American Express  vs.  Crown Point Energy

American Express

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 14 (%) 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.

Crown Point Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Point Energy 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 essential indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Express and Crown Point

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

The idea behind American Express and Crown Point Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.