Correlation Between AM EAGLE and Aluminumof China
Can any of the company-specific risk be diversified away by investing in both AM EAGLE and Aluminumof China 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 AM EAGLE and Aluminumof China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AM EAGLE OUTFITTERS and Aluminum of, you can compare the effects of market volatilities on AM EAGLE and Aluminumof China 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 AM EAGLE with a short position of Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and Aluminumof China.
Diversification Opportunities for AM EAGLE and Aluminumof China
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AFG and Aluminumof is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and AM 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 AM EAGLE OUTFITTERS are associated (or correlated) with Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of AM EAGLE i.e., AM EAGLE and Aluminumof China go up and down completely randomly.
Pair Corralation between AM EAGLE and Aluminumof China
Assuming the 90 days trading horizon AM EAGLE is expected to generate 9.16 times less return on investment than Aluminumof China. In addition to that, AM EAGLE is 1.06 times more volatile than Aluminum of. It trades about 0.01 of its total potential returns per unit of risk. Aluminum of is currently generating about 0.13 per unit of volatility. If you would invest 52.00 in Aluminum of on September 13, 2024 and sell it today you would earn a total of 5.00 from holding Aluminum of or generate 9.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AM EAGLE OUTFITTERS vs. Aluminum of
Performance |
| Timeline |
| AM EAGLE OUTFITTERS |
| Aluminumof China |
AM EAGLE and Aluminumof China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AM EAGLE and Aluminumof China
The main advantage of trading using opposite AM EAGLE and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE position performs unexpectedly, Aluminumof China 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 Aluminumof China will offset losses from the drop in Aluminumof China's long position.The idea behind AM EAGLE OUTFITTERS and Aluminum of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Aluminumof China vs. Norsk Hydro ASA | Aluminumof China vs. Kaiser Aluminum | Aluminumof China vs. Superior Plus Corp | Aluminumof China vs. SIVERS SEMICONDUCTORS AB |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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