Correlation Between American Express and American Century

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Can any of the company-specific risk be diversified away by investing in both American Express and American Century 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 American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and American Century One, you can compare the effects of market volatilities on American Express and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and American Century.

Diversification Opportunities for American Express and American Century

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between American and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Express and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century One has no effect on the direction of American Express i.e., American Express and American Century go up and down completely randomly.

Pair Corralation between American Express and American Century

Considering the 90-day investment horizon American Express is expected to generate 2.54 times more return on investment than American Century. However, American Express is 2.54 times more volatile than American Century One. It trades about 0.29 of its potential returns per unit of risk. American Century One is currently generating about 0.39 per unit of risk. If you would invest  13,931  in American Express on September 4, 2022 and sell it today you would earn a total of  1,744  from holding American Express or generate 12.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  American Century One

 Performance (%) 
       Timeline  
American Express 
American Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2023.

American Price Channel

American Century One 
American Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Century One are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

American Express and American Century Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and American Century

The main advantage of trading using opposite American Express and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, American Century 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 Century will offset losses from the drop in American Century's long position.
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The idea behind American Express and American Century One 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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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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