Correlation Between American Eagle and Addus HomeCare
Can any of the company-specific risk be diversified away by investing in both American Eagle and Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare, you can compare the effects of market volatilities on American Eagle and Addus HomeCare 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 Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Addus HomeCare.
Diversification Opportunities for American Eagle and Addus HomeCare
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Addus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of American Eagle i.e., American Eagle and Addus HomeCare go up and down completely randomly.
Pair Corralation between American Eagle and Addus HomeCare
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Addus HomeCare. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.38 times less risky than Addus HomeCare. The stock trades about -0.14 of its potential returns per unit of risk. The Addus HomeCare is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 11,700 in Addus HomeCare on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Addus HomeCare or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Eagle Outfitters vs. Addus HomeCare
Performance |
| Timeline |
| American Eagle Outfitters |
| Addus HomeCare |
American Eagle and Addus HomeCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Addus HomeCare
The main advantage of trading using opposite American Eagle and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Addus HomeCare 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 Addus HomeCare will offset losses from the drop in Addus HomeCare's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Addus HomeCare vs. NEWELL RUBBERMAID | Addus HomeCare vs. Fukuyama Transporting Co | Addus HomeCare vs. Rayonier Advanced Materials | Addus HomeCare vs. APPLIED MATERIALS |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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