Correlation Between American Eagle and Charter Communications
Can any of the company-specific risk be diversified away by investing in both American Eagle and Charter 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 Charter 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 Charter Communications, you can compare the effects of market volatilities on American Eagle and Charter 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 Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Charter Communications.
Diversification Opportunities for American Eagle and Charter Communications
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Charter is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of American Eagle i.e., American Eagle and Charter Communications go up and down completely randomly.
Pair Corralation between American Eagle and Charter Communications
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.16 times more return on investment than Charter Communications. However, American Eagle is 1.16 times more volatile than Charter Communications. It trades about 0.05 of its potential returns per unit of risk. Charter Communications is currently generating about 0.01 per unit of risk. If you would invest 1,150 in American Eagle Outfitters on September 12, 2024 and sell it today you would earn a total of 550.00 from holding American Eagle Outfitters or generate 47.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Charter Communications
Performance |
| Timeline |
| American Eagle Outfitters |
| Charter Communications |
American Eagle and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Charter Communications
The main advantage of trading using opposite American Eagle and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Charter 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 Charter Communications will offset losses from the drop in Charter Communications' long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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