Correlation Between American Eagle and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both American Eagle and Gamma Communications 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 Gamma Communications 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 Gamma Communications plc, you can compare the effects of market volatilities on American Eagle and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Gamma Communications.
Diversification Opportunities for American Eagle and Gamma Communications
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Gamma is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of American Eagle i.e., American Eagle and Gamma Communications go up and down completely randomly.
Pair Corralation between American Eagle and Gamma Communications
Assuming the 90 days trading horizon American Eagle is expected to generate 1.09 times less return on investment than Gamma Communications. In addition to that, American Eagle is 1.19 times more volatile than Gamma Communications plc. It trades about 0.05 of its total potential returns per unit of risk. Gamma Communications plc is currently generating about 0.07 per unit of volatility. If you would invest 1,213 in Gamma Communications plc on September 12, 2024 and sell it today you would earn a total of 747.00 from holding Gamma Communications plc or generate 61.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Gamma Communications plc
Performance |
| Timeline |
| American Eagle Outfitters |
| Gamma Communications plc |
American Eagle and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Gamma Communications
The main advantage of trading using opposite American Eagle and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Gamma Communications vs. Superior Plus Corp | Gamma Communications vs. SIVERS SEMICONDUCTORS AB | Gamma Communications vs. Norsk Hydro ASA | Gamma Communications vs. Reliance Steel Aluminum |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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