Correlation Between American Eagle and Playmates Toys
Can any of the company-specific risk be diversified away by investing in both American Eagle and Playmates Toys 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 Playmates Toys 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 Playmates Toys Limited, you can compare the effects of market volatilities on American Eagle and Playmates Toys 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 Playmates Toys. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Playmates Toys.
Diversification Opportunities for American Eagle and Playmates Toys
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Playmates is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Playmates Toys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playmates Toys 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 Playmates Toys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playmates Toys has no effect on the direction of American Eagle i.e., American Eagle and Playmates Toys go up and down completely randomly.
Pair Corralation between American Eagle and Playmates Toys
Assuming the 90 days trading horizon American Eagle is expected to generate 1.94 times less return on investment than Playmates Toys. But when comparing it to its historical volatility, American Eagle Outfitters is 3.65 times less risky than Playmates Toys. It trades about 0.08 of its potential returns per unit of risk. Playmates Toys Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.60 in Playmates Toys Limited on October 30, 2024 and sell it today you would lose (0.10) from holding Playmates Toys Limited or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Playmates Toys Limited
Performance |
| Timeline |
| American Eagle Outfitters |
| Playmates Toys |
American Eagle and Playmates Toys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Playmates Toys
The main advantage of trading using opposite American Eagle and Playmates Toys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Playmates Toys 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 Playmates Toys will offset losses from the drop in Playmates Toys' long position.| American Eagle vs. REVO INSURANCE SPA | American Eagle vs. Reinsurance Group of | American Eagle vs. Japan Post Insurance | American Eagle vs. Goosehead Insurance |
| Playmates Toys vs. Booking Holdings | Playmates Toys vs. Oriental Land Co | Playmates Toys vs. ANTA Sports Products | Playmates Toys vs. Li Ning Company |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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