Correlation Between Chevron Corp and American Express

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

Diversification Opportunities for Chevron Corp and American Express

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chevron and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Chevron Corp 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 Chevron Corp are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Chevron Corp i.e., Chevron Corp and American Express go up and down completely randomly.

Pair Corralation between Chevron Corp and American Express

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.16 times less return on investment than American Express. In addition to that, Chevron Corp is 2.06 times more volatile than American Express. It trades about 0.17 of its total potential returns per unit of risk. American Express is currently generating about 0.4 per unit of volatility. If you would invest  14,893  in American Express on May 21, 2022 and sell it today you would earn a total of  1,572  from holding American Express or generate 10.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  American Express

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
0 of 100
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

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 latest stock price disarray, may contribute to short-term losses for the insiders.

American Price Channel

Chevron Corp and American Express Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and American Express

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

American Express

Pair trading matchups for American Express

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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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