Correlation Between Vanguard FTSE and American Express

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

Diversification Opportunities for Vanguard FTSE and American Express

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vanguard and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Vanguard FTSE 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 Vanguard FTSE Emerging 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 Vanguard FTSE i.e., Vanguard FTSE and American Express go up and down completely randomly.

Pair Corralation between Vanguard FTSE and American Express

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 1.35 times less return on investment than American Express. But when comparing it to its historical volatility, Vanguard FTSE Emerging is 1.34 times less risky than American Express. It trades about 0.1 of its potential returns per unit of risk. American Express is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14,382  in American Express on September 5, 2022 and sell it today you would earn a total of  1,293  from holding American Express or generate 8.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy97.73%
ValuesDaily Returns

Vanguard FTSE Emerging  vs.  American Express

 Performance (%) 
       Timeline  
Vanguard FTSE Emerging 
Vanguard Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Vanguard FTSE is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard 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 weak basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2023.

American Price Channel

Vanguard FTSE and American Express Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard FTSE and American Express

The main advantage of trading using opposite Vanguard FTSE and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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.
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The idea behind Vanguard FTSE Emerging 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.
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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