Correlation Between American Express and Alcoa Corp

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

Diversification Opportunities for American Express and Alcoa Corp

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between American and Alcoa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of American Express i.e., American Express and Alcoa Corp go up and down completely randomly.

Pair Corralation between American Express and Alcoa Corp

Considering the 90-day investment horizon American Express is expected to generate 0.46 times more return on investment than Alcoa Corp. However, American Express is 2.18 times less risky than Alcoa Corp. It trades about -0.04 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.13 per unit of risk. If you would invest  14,860  in American Express on July 7, 2022 and sell it today you would lose (423.00)  from holding American Express or give up 2.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
American Express 
American Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, American Express is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

American Price Channel

Alcoa Corp 
Alcoa Performance
0 of 100
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alcoa Price Channel

American Express and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Alcoa Corp

The main advantage of trading using opposite American Express and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.
American Express vs. Paypal Holdings
The idea behind American Express and Alcoa Corp 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.
Alcoa Corp vs. Amazon Inc
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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