Correlation Between American Eagle and Pearson PLC
Can any of the company-specific risk be diversified away by investing in both American Eagle and Pearson PLC 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 Pearson PLC 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 Pearson PLC ADR, you can compare the effects of market volatilities on American Eagle and Pearson PLC 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 Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Pearson PLC.
Diversification Opportunities for American Eagle and Pearson PLC
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Pearson is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR 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 Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of American Eagle i.e., American Eagle and Pearson PLC go up and down completely randomly.
Pair Corralation between American Eagle and Pearson PLC
Considering the 90-day investment horizon American Eagle is expected to generate 1.11 times less return on investment than Pearson PLC. In addition to that, American Eagle is 2.27 times more volatile than Pearson PLC ADR. It trades about 0.09 of its total potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.22 per unit of volatility. If you would invest 1,490 in Pearson PLC ADR on September 3, 2024 and sell it today you would earn a total of 78.00 from holding Pearson PLC ADR or generate 5.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Pearson PLC ADR
Performance |
| Timeline |
| American Eagle Outfitters |
| Pearson PLC ADR |
American Eagle and Pearson PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Pearson PLC
The main advantage of trading using opposite American Eagle and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Pearson PLC 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 Pearson PLC will offset losses from the drop in Pearson PLC's long position.| American Eagle vs. Ross Stores | American Eagle vs. Childrens Place | American Eagle vs. Buckle Inc | American Eagle vs. Guess Inc |
| Pearson PLC vs. John Wiley Sons | Pearson PLC vs. New York Times | Pearson PLC vs. Lee Enterprises Incorporated | Pearson PLC vs. Gannett Co |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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