Correlation Between American Eagle and Bridgestone
Can any of the company-specific risk be diversified away by investing in both American Eagle and Bridgestone 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 Bridgestone 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 Bridgestone, you can compare the effects of market volatilities on American Eagle and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Bridgestone.
Diversification Opportunities for American Eagle and Bridgestone
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Bridgestone is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of American Eagle i.e., American Eagle and Bridgestone go up and down completely randomly.
Pair Corralation between American Eagle and Bridgestone
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.96 times more return on investment than Bridgestone. However, American Eagle is 1.96 times more volatile than Bridgestone. It trades about 0.02 of its potential returns per unit of risk. Bridgestone is currently generating about 0.01 per unit of risk. If you would invest 1,426 in American Eagle Outfitters on October 27, 2024 and sell it today you would earn a total of 224.00 from holding American Eagle Outfitters or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Eagle Outfitters vs. Bridgestone
Performance |
| Timeline |
| American Eagle Outfitters |
| Bridgestone |
American Eagle and Bridgestone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Bridgestone
The main advantage of trading using opposite American Eagle and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.| American Eagle vs. Tyson Foods | American Eagle vs. PLANT VEDA FOODS | American Eagle vs. Monument Mining Limited | American Eagle vs. Zijin Mining Group |
| Bridgestone vs. CHINA SOUTHN AIR H | Bridgestone vs. Pentair plc | Bridgestone vs. REINET INVESTMENTS SCA | Bridgestone vs. HK Electric Investments |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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