Correlation Between American Express and Apple

Can any of the company-specific risk be diversified away by investing in both American Express and Apple 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 Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and Apple Inc, you can compare the effects of market volatilities on American Express and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Apple.

Diversification Opportunities for American Express and Apple

-0.72

Correlation Coefficient

American Express  Apple

Pay attention - limited upside

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

Pair Corralation between American Express and Apple

Considering the 90-day investment horizon American Express is expected to generate 2.08 times less return on investment than Apple. But when comparing it to its historical volatility, American Express is 1.17 times less risky than Apple. It trades about 0.11 of its potential returns per unit of risk. Apple Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  16,958  in Apple Inc on February 5, 2024 and sell it today you would earn a total of  1,380  from holding Apple Inc or generate 8.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

American Express  vs.  Apple Inc

American Express

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with American Express and Apple

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

The idea behind American Express and Apple Inc 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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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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.