Correlation Between American Eagle and JAPAN AIRLINES
Can any of the company-specific risk be diversified away by investing in both American Eagle and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES, you can compare the effects of market volatilities on American Eagle and JAPAN AIRLINES 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 JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and JAPAN AIRLINES.
Diversification Opportunities for American Eagle and JAPAN AIRLINES
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and JAPAN is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of American Eagle i.e., American Eagle and JAPAN AIRLINES go up and down completely randomly.
Pair Corralation between American Eagle and JAPAN AIRLINES
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the JAPAN AIRLINES. In addition to that, American Eagle is 2.34 times more volatile than JAPAN AIRLINES. It trades about -0.07 of its total potential returns per unit of risk. JAPAN AIRLINES is currently generating about 0.14 per unit of volatility. If you would invest 1,530 in JAPAN AIRLINES on November 4, 2024 and sell it today you would earn a total of 50.00 from holding JAPAN AIRLINES or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Eagle Outfitters vs. JAPAN AIRLINES
Performance |
| Timeline |
| American Eagle Outfitters |
| JAPAN AIRLINES |
American Eagle and JAPAN AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and JAPAN AIRLINES
The main advantage of trading using opposite American Eagle and JAPAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, JAPAN AIRLINES 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 JAPAN AIRLINES will offset losses from the drop in JAPAN AIRLINES's long position.| American Eagle vs. CARSALESCOM | American Eagle vs. Geely Automobile Holdings | American Eagle vs. East Africa Metals | American Eagle vs. De Grey Mining |
| JAPAN AIRLINES vs. TRADEDOUBLER AB SK | JAPAN AIRLINES vs. BJs Wholesale Club | JAPAN AIRLINES vs. Costco Wholesale Corp | JAPAN AIRLINES vs. Fast Retailing Co |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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