Correlation Between American Express and Alphabet

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

Diversification Opportunities for American Express and Alphabet

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between American and Alphabet is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Alphabet Cl A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Cl A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Cl A has no effect on the direction of American Express i.e., American Express and Alphabet go up and down completely randomly.

Pair Corralation between American Express and Alphabet

Considering the 90-day investment horizon American Express is expected to under-perform the Alphabet. In addition to that, American Express is 1.11 times more volatile than Alphabet Cl A. It trades about -0.2 of its total potential returns per unit of risk. Alphabet Cl A is currently generating about -0.2 per unit of volatility. If you would invest  10,894  in Alphabet Cl A on July 1, 2022 and sell it today you would lose (889.00)  from holding Alphabet Cl A or give up 8.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Alphabet Cl A

 Performance (%) 
       Timeline  
American Express 
American Performance
0 of 100
Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. 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

Alphabet Cl A 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical and fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Alphabet Price Channel

American Express and Alphabet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Alphabet

The main advantage of trading using opposite American Express and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.
American Express vs. Paypal Holdings
The idea behind American Express and Alphabet Cl A 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.
Alphabet vs. Tencent Holdings
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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