Correlation Between American Eagle and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both American Eagle and Chesapeake Utilities 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 Chesapeake Utilities 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 Chesapeake Utilities, you can compare the effects of market volatilities on American Eagle and Chesapeake Utilities 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 Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Chesapeake Utilities.
Diversification Opportunities for American Eagle and Chesapeake Utilities
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Chesapeake is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of American Eagle i.e., American Eagle and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between American Eagle and Chesapeake Utilities
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 2.56 times more return on investment than Chesapeake Utilities. However, American Eagle is 2.56 times more volatile than Chesapeake Utilities. It trades about -0.05 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about -0.17 per unit of risk. If you would invest 1,786 in American Eagle Outfitters on October 26, 2024 and sell it today you would lose (136.00) from holding American Eagle Outfitters or give up 7.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Chesapeake Utilities
Performance |
| Timeline |
| American Eagle Outfitters |
| Chesapeake Utilities |
American Eagle and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Chesapeake Utilities
The main advantage of trading using opposite American Eagle and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Chesapeake Utilities 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 Chesapeake Utilities will offset losses from the drop in Chesapeake Utilities' long position.| American Eagle vs. FAST RETAIL ADR | American Eagle vs. TRADEDOUBLER AB SK | American Eagle vs. SALESFORCE INC CDR | American Eagle vs. TRADEGATE |
| Chesapeake Utilities vs. alstria office REIT AG | Chesapeake Utilities vs. American Eagle Outfitters | Chesapeake Utilities vs. SCANSOURCE | Chesapeake Utilities vs. Infrastrutture Wireless Italiane |
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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