Correlation Between American Eagle and Virtus Investment
Can any of the company-specific risk be diversified away by investing in both American Eagle and Virtus Investment 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 Virtus Investment 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 Virtus Investment Partners, you can compare the effects of market volatilities on American Eagle and Virtus Investment 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 Virtus Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Virtus Investment.
Diversification Opportunities for American Eagle and Virtus Investment
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Virtus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Virtus Investment Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Investment 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 Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of American Eagle i.e., American Eagle and Virtus Investment go up and down completely randomly.
Pair Corralation between American Eagle and Virtus Investment
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Virtus Investment. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.09 times less risky than Virtus Investment. The stock trades about -0.43 of its potential returns per unit of risk. The Virtus Investment Partners is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest 19,377 in Virtus Investment Partners on November 27, 2024 and sell it today you would lose (2,377) from holding Virtus Investment Partners or give up 12.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Virtus Investment Partners
Performance |
| Timeline |
| American Eagle Outfitters |
| Virtus Investment |
American Eagle and Virtus Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Virtus Investment
The main advantage of trading using opposite American Eagle and Virtus Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Virtus Investment 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 Virtus Investment will offset losses from the drop in Virtus Investment's long position.| American Eagle vs. Gaming and Leisure | American Eagle vs. PLAYWAY SA ZY 10 | American Eagle vs. BJs Restaurants | American Eagle vs. Air Transport Services |
| Virtus Investment vs. Gladstone Investment | Virtus Investment vs. TIANDE CHEMICAL | Virtus Investment vs. Sekisui Chemical Co | Virtus Investment vs. Silicon Motion Technology |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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