Correlation Between American Eagle and Apple
Can any of the company-specific risk be diversified away by investing in both American Eagle and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on American Eagle and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Apple.
Diversification Opportunities for American Eagle and Apple
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Apple is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of American Eagle i.e., American Eagle and Apple go up and down completely randomly.
Pair Corralation between American Eagle and Apple
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Apple. In addition to that, American Eagle is 1.51 times more volatile than Apple Inc. It trades about -0.04 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.11 per unit of volatility. If you would invest 17,665 in Apple Inc on August 28, 2024 and sell it today you would earn a total of 4,275 from holding Apple Inc or generate 24.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Apple Inc
Performance |
| Timeline |
| American Eagle Outfitters |
| Apple Inc |
American Eagle and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Apple
The main advantage of trading using opposite American Eagle and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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