Correlation Between Ford and American Express

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

By analyzing existing cross correlation between Ford Motor and American Express Co, you can compare the effects of market volatilities on Ford and American Express 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 Ford with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and American Express.

Diversification Opportunities for Ford and American Express

0.08

Correlation Coefficient

Ford  American Express

Significant diversification

The 3 months correlation between Ford and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Ford 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 Ford Motor are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Ford i.e., Ford and American Express go up and down completely randomly.

Pair Corralation between Ford and American Express

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the American Express. In addition to that, Ford is 1.49 times more volatile than American Express Co. It trades about -0.05 of its total potential returns per unit of risk. American Express Co is currently generating about 0.14 per unit of volatility. If you would invest  26,494  in American Express Co on September 24, 2024 and sell it today you would earn a total of  3,474  from holding American Express Co or generate 13.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  American Express Co

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

American Express

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and American Express

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

The idea behind Ford Motor and American Express Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.