Correlation Between American Express and Match

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

By analyzing existing cross correlation between American Express and Match Group 5, you can compare the effects of market volatilities on American Express and Match 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 Match. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Match.

Diversification Opportunities for American Express and Match

-0.59

Correlation Coefficient

American Express  Match

Excellent diversification

The 3 months correlation between American and Match is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Match Group 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Match Group 5 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 Match. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Match Group 5 has no effect on the direction of American Express i.e., American Express and Match go up and down completely randomly.

Pair Corralation between American Express and Match

Considering the 90-day investment horizon American Express is expected to generate 3.93 times more return on investment than Match. However, American Express is 3.93 times more volatile than Match Group 5. It trades about 0.16 of its potential returns per unit of risk. Match Group 5 is currently generating about -0.18 per unit of risk. If you would invest  26,150  in American Express on September 18, 2024 and sell it today you would earn a total of  4,207  from holding American Express or generate 16.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.3%
Values	Daily Returns

American Express  vs.  Match Group 5

American Express

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 12 (%) 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.

Match Group 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Match Group 5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Match 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 Match

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

The idea behind American Express and Match Group 5 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.