Correlation Between American Eagle and China Resources
Can any of the company-specific risk be diversified away by investing in both American Eagle and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on American Eagle and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and China Resources.
Diversification Opportunities for American Eagle and China Resources
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and China is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of American Eagle i.e., American Eagle and China Resources go up and down completely randomly.
Pair Corralation between American Eagle and China Resources
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 0.93 times more return on investment than China Resources. However, American Eagle Outfitters is 1.07 times less risky than China Resources. It trades about 0.03 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.01 per unit of risk. If you would invest 1,424 in American Eagle Outfitters on August 26, 2024 and sell it today you would earn a total of 266.00 from holding American Eagle Outfitters or generate 18.68% 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. China Resources Beer
Performance |
| Timeline |
| American Eagle Outfitters |
| China Resources Beer |
American Eagle and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and China Resources
The main advantage of trading using opposite American Eagle and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |