Correlation Between New Residential and American Eagle
Can any of the company-specific risk be diversified away by investing in both New Residential and American Eagle 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 New Residential and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and American Eagle Outfitters, you can compare the effects of market volatilities on New Residential and American Eagle 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 New Residential with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and American Eagle.
Diversification Opportunities for New Residential and American Eagle
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and American is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and New Residential 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 New Residential Investment are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of New Residential i.e., New Residential and American Eagle go up and down completely randomly.
Pair Corralation between New Residential and American Eagle
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.37 times more return on investment than American Eagle. However, New Residential Investment is 2.71 times less risky than American Eagle. It trades about 0.06 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.0 per unit of risk. If you would invest 1,014 in New Residential Investment on September 12, 2024 and sell it today you would earn a total of 39.00 from holding New Residential Investment or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
New Residential Investment vs. American Eagle Outfitters
Performance |
| Timeline |
| New Residential Inve |
| American Eagle Outfitters |
New Residential and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and American Eagle
The main advantage of trading using opposite New Residential and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, American Eagle 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 Eagle will offset losses from the drop in American Eagle's long position.| New Residential vs. PLAYTIKA HOLDING DL 01 | New Residential vs. Nine Dragons Paper | New Residential vs. Sunstone Hotel Investors | New Residential vs. Onxeo SA |
| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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