Correlation Between American Express and FirstCash
Can any of the company-specific risk be diversified away by investing in both American Express and FirstCash 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 FirstCash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and FirstCash, you can compare the effects of market volatilities on American Express and FirstCash 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 FirstCash. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and FirstCash.
Diversification Opportunities for American Express and FirstCash
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and FirstCash is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Express and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash 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 FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of American Express i.e., American Express and FirstCash go up and down completely randomly.
Pair Corralation between American Express and FirstCash
Considering the 90-day investment horizon American Express is expected to generate 1.2 times less return on investment than FirstCash. But when comparing it to its historical volatility, American Express is 1.0 times less risky than FirstCash. It trades about 0.08 of its potential returns per unit of risk. FirstCash is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,783 in FirstCash on January 21, 2024 and sell it today you would earn a total of 6,258 from holding FirstCash or generate 92.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
American Express vs. FirstCash
Performance |
Timeline |
American Express |
FirstCash |
American Express and FirstCash Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Express and FirstCash
The main advantage of trading using opposite American Express and FirstCash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, FirstCash 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 FirstCash will offset losses from the drop in FirstCash's long position.American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Mastercard |
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 the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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