Correlation Between American Express and Big 5

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Can any of the company-specific risk be diversified away by investing in both American Express and Big 5 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 Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Big 5 Sporting, you can compare the effects of market volatilities on American Express and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Big 5.

Diversification Opportunities for American Express and Big 5

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and Big 5 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of American Express i.e., American Express and Big 5 go up and down completely randomly.

Pair Corralation between American Express and Big 5

Considering the 90-day investment horizon American Express is expected to under-perform the Big 5. In addition to that, American Express is 1.02 times more volatile than Big 5 Sporting. It trades about -0.04 of its total potential returns per unit of risk. Big 5 Sporting is currently generating about -0.01 per unit of volatility. If you would invest  1,151  in Big 5 Sporting on July 7, 2022 and sell it today you would lose (14.00)  from holding Big 5 Sporting or give up 1.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Big 5 Sporting

 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

Big 5 Sporting 
Big 5 Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Big 5 Price Channel

American Express and Big 5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Big 5

The main advantage of trading using opposite American Express and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.
American Express vs. Paypal Holdings
The idea behind American Express and Big 5 Sporting 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.
Big 5 vs. Best Buy Company
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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