Correlation Between American Express and Ford

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

Diversification Opportunities for American Express and Ford

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and Ford is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of American Express i.e., American Express and Ford go up and down completely randomly.

Pair Corralation between American Express and Ford

Considering the 90-day investment horizon American Express is expected to generate 2.12 times less return on investment than Ford. But when comparing it to its historical volatility, American Express is 1.74 times less risky than Ford. It trades about 0.44 of its potential returns per unit of risk. Ford Motor is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest  1,140  in Ford Motor on May 14, 2022 and sell it today you would earn a total of  443.00  from holding Ford Motor or generate 38.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Ford Motor

 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 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

Ford Motor 
Ford Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

American Express and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Ford

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

American Express

Pair trading matchups for American Express

The idea behind American Express and Ford Motor 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.
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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