Correlation Between American Express and HUBBELL

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

By analyzing existing cross correlation between American Express and HUBBELL INC 35, you can compare the effects of market volatilities on American Express and HUBBELL 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 HUBBELL. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and HUBBELL.

Diversification Opportunities for American Express and HUBBELL

-0.67

Correlation Coefficient

American Express  HUBBELL

Excellent diversification

The 3 months correlation between American and HUBBELL is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Express and HUBBELL INC 35 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUBBELL INC 35 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 HUBBELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUBBELL INC 35 has no effect on the direction of American Express i.e., American Express and HUBBELL go up and down completely randomly.

Pair Corralation between American Express and HUBBELL

Considering the 90-day investment horizon American Express is expected to generate 2.32 times more return on investment than HUBBELL. However, American Express is 2.32 times more volatile than HUBBELL INC 35. It trades about 0.17 of its potential returns per unit of risk. HUBBELL INC 35 is currently generating about -0.11 per unit of risk. If you would invest  25,365  in American Express on September 3, 2024 and sell it today you would earn a total of  4,861  from holding American Express or generate 19.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.94%
Values	Daily Returns

American Express  vs.  HUBBELL INC 35

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 unfluctuating basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

HUBBELL INC 35

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUBBELL INC 35 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HUBBELL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and HUBBELL

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

The idea behind American Express and HUBBELL INC 35 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.