Correlation Between American Eagle and NEXON Co
Can any of the company-specific risk be diversified away by investing in both American Eagle and NEXON Co 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 NEXON Co 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 NEXON Co, you can compare the effects of market volatilities on American Eagle and NEXON Co 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 NEXON Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and NEXON Co.
Diversification Opportunities for American Eagle and NEXON Co
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and NEXON is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON Co 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 NEXON Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON Co has no effect on the direction of American Eagle i.e., American Eagle and NEXON Co go up and down completely randomly.
Pair Corralation between American Eagle and NEXON Co
Assuming the 90 days trading horizon American Eagle is expected to generate 3.92 times less return on investment than NEXON Co. But when comparing it to its historical volatility, American Eagle Outfitters is 1.84 times less risky than NEXON Co. It trades about 0.02 of its potential returns per unit of risk. NEXON Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 587.00 in NEXON Co on November 6, 2024 and sell it today you would earn a total of 613.00 from holding NEXON Co or generate 104.43% 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. NEXON Co
Performance |
| Timeline |
| American Eagle Outfitters |
| NEXON Co |
American Eagle and NEXON Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and NEXON Co
The main advantage of trading using opposite American Eagle and NEXON Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, NEXON Co 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 NEXON Co will offset losses from the drop in NEXON Co's long position.| American Eagle vs. COSMOSTEEL HLDGS | American Eagle vs. British American Tobacco | American Eagle vs. Tencent Music Entertainment | American Eagle vs. Daido Steel Co |
| NEXON Co vs. Flutter Entertainment PLC | NEXON Co vs. DeVry Education Group | NEXON Co vs. American Public Education | NEXON Co vs. STRAYER EDUCATION |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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