Correlation Between American Eagle and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both American Eagle and Aedas Homes 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 Aedas Homes 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 Aedas Homes SA, you can compare the effects of market volatilities on American Eagle and Aedas Homes 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 Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Aedas Homes.
Diversification Opportunities for American Eagle and Aedas Homes
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Aedas is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of American Eagle i.e., American Eagle and Aedas Homes go up and down completely randomly.
Pair Corralation between American Eagle and Aedas Homes
Assuming the 90 days trading horizon American Eagle is expected to generate 2.42 times less return on investment than Aedas Homes. In addition to that, American Eagle is 1.57 times more volatile than Aedas Homes SA. It trades about 0.03 of its total potential returns per unit of risk. Aedas Homes SA is currently generating about 0.1 per unit of volatility. If you would invest 1,082 in Aedas Homes SA on August 24, 2024 and sell it today you would earn a total of 1,398 from holding Aedas Homes SA or generate 129.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Aedas Homes SA
Performance |
| Timeline |
| American Eagle Outfitters |
| Aedas Homes SA |
American Eagle and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Aedas Homes
The main advantage of trading using opposite American Eagle and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Aedas Homes 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 Aedas Homes will offset losses from the drop in Aedas Homes' long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Aedas Homes vs. Lennar | Aedas Homes vs. NVR Inc | Aedas Homes vs. PulteGroup | Aedas Homes vs. Sekisui Chemical 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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