Correlation Between American Eagle and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both American Eagle and Olympic Steel 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 Olympic Steel 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 Olympic Steel, you can compare the effects of market volatilities on American Eagle and Olympic Steel 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 Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Olympic Steel.
Diversification Opportunities for American Eagle and Olympic Steel
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Olympic is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of American Eagle i.e., American Eagle and Olympic Steel go up and down completely randomly.
Pair Corralation between American Eagle and Olympic Steel
Considering the 90-day investment horizon American Eagle is expected to generate 1.12 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, American Eagle Outfitters is 1.03 times less risky than Olympic Steel. It trades about 0.03 of its potential returns per unit of risk. Olympic Steel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,150 in Olympic Steel on September 12, 2024 and sell it today you would earn a total of 1,062 from holding Olympic Steel or generate 33.71% 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. Olympic Steel
Performance |
| Timeline |
| American Eagle Outfitters |
| Olympic Steel |
American Eagle and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Olympic Steel
The main advantage of trading using opposite American Eagle and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.| American Eagle vs. Foot Locker | American Eagle vs. Lands End | American Eagle vs. Duluth Holdings | American Eagle vs. Destination XL Group |
| Olympic Steel vs. Universal Stainless Alloy | Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic Steel vs. POSCO Holdings |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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