Correlation Between American Eagle and Magna International
Can any of the company-specific risk be diversified away by investing in both American Eagle and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on American Eagle and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Magna International.
Diversification Opportunities for American Eagle and Magna International
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Magna is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of American Eagle i.e., American Eagle and Magna International go up and down completely randomly.
Pair Corralation between American Eagle and Magna International
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Magna International. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.66 times less risky than Magna International. The stock trades about -0.47 of its potential returns per unit of risk. The Magna International is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 4,250 in Magna International on August 27, 2024 and sell it today you would earn a total of 396.00 from holding Magna International or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Magna International
Performance |
| Timeline |
| American Eagle Outfitters |
| Magna International |
American Eagle and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Magna International
The main advantage of trading using opposite American Eagle and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| American Eagle vs. Urban Outfitters | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place | American Eagle vs. Abercrombie Fitch |
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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 the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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