Correlation Between American Eagle and Federal Home
Can any of the company-specific risk be diversified away by investing in both American Eagle and Federal Home 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 Eagle and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and Federal Home 530, you can compare the effects of market volatilities on American Eagle and Federal Home 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 Eagle with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Federal Home.
Diversification Opportunities for American Eagle and Federal Home
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Federal is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Federal Home 530 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home 530 and American Eagle 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 Eagle Outfitters are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home 530 has no effect on the direction of American Eagle i.e., American Eagle and Federal Home go up and down completely randomly.
Pair Corralation between American Eagle and Federal Home
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Federal Home. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 2.49 times less risky than Federal Home. The stock trades about -0.02 of its potential returns per unit of risk. The Federal Home 530 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 432.00 in Federal Home 530 on September 20, 2024 and sell it today you would earn a total of 1,260 from holding Federal Home 530 or generate 291.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Federal Home 530
Performance |
| Timeline |
| American Eagle Outfitters |
| Federal Home 530 |
American Eagle and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Federal Home
The main advantage of trading using opposite American Eagle and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| American Eagle vs. Capri Holdings | American Eagle vs. Movado Group | American Eagle vs. Tapestry | American Eagle vs. Brilliant Earth Group |
| Federal Home vs. Victorias Secret Co | Federal Home vs. Topbuild Corp | Federal Home vs. RBC Bearings Incorporated | Federal Home vs. American Eagle Outfitters |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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