Correlation Between American Eagle and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both American Eagle and Citic Telecom 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 Citic Telecom 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 Citic Telecom International, you can compare the effects of market volatilities on American Eagle and Citic Telecom 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 Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Citic Telecom.
Diversification Opportunities for American Eagle and Citic Telecom
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Citic is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern 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 Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of American Eagle i.e., American Eagle and Citic Telecom go up and down completely randomly.
Pair Corralation between American Eagle and Citic Telecom
Assuming the 90 days trading horizon American Eagle is expected to generate 3.43 times less return on investment than Citic Telecom. But when comparing it to its historical volatility, American Eagle Outfitters is 2.8 times less risky than Citic Telecom. It trades about 0.05 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8.69 in Citic Telecom International on September 12, 2024 and sell it today you would earn a total of 18.31 from holding Citic Telecom International or generate 210.7% 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. Citic Telecom International
Performance |
| Timeline |
| American Eagle Outfitters |
| Citic Telecom Intern |
American Eagle and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Citic Telecom
The main advantage of trading using opposite American Eagle and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Citic Telecom 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 Citic Telecom will offset losses from the drop in Citic Telecom's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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