Correlation Between Nasdaq and American Express

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

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

Diversification Opportunities for Nasdaq and American Express

0.91

Correlation Coefficient

Nasdaq  American Express

Almost no diversification

The 3 months correlation between Nasdaq and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and American Express go up and down completely randomly.

Pair Corralation between Nasdaq and American Express

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.16 times less risky than American Express. The stock trades about -0.22 of its potential returns per unit of risk. The American Express Co is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  30,545  in American Express Co on September 24, 2024 and sell it today you would lose (577.00) from holding American Express Co or give up 1.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  American Express Co

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 Nasdaq and American Express

The main advantage of trading using opposite Nasdaq and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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 Stocks Directory module to find actively traded stocks across global markets.