Correlation Between American Express and College Retirement
Can any of the company-specific risk be diversified away by investing in both American Express and College Retirement 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 College Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and College Retirement Equities, you can compare the effects of market volatilities on American Express and College Retirement 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 College Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and College Retirement.
Diversification Opportunities for American Express and College Retirement
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and College is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Express and College Retirement Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on College Retirement 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 College Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of College Retirement has no effect on the direction of American Express i.e., American Express and College Retirement go up and down completely randomly.
Pair Corralation between American Express and College Retirement
Considering the 90-day investment horizon American Express is expected to generate 1.66 times more return on investment than College Retirement. However, American Express is 1.66 times more volatile than College Retirement Equities. It trades about 0.17 of its potential returns per unit of risk. College Retirement Equities is currently generating about 0.2 per unit of risk. If you would invest 25,352 in American Express on September 11, 2024 and sell it today you would earn a total of 4,320 from holding American Express or generate 17.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Express vs. College Retirement Equities
Performance |
Timeline |
American Express |
College Retirement |
American Express and College Retirement Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and College Retirement
The main advantage of trading using opposite American Express and College Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, College Retirement 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 College Retirement will offset losses from the drop in College Retirement's long position.American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Mastercard |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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