Correlation Between American Eagle and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both American Eagle and Choice Hotels 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 Choice Hotels 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 Choice Hotels International, you can compare the effects of market volatilities on American Eagle and Choice Hotels 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Choice Hotels.
Diversification Opportunities for American Eagle and Choice Hotels
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Choice is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of American Eagle i.e., American Eagle and Choice Hotels go up and down completely randomly.
Pair Corralation between American Eagle and Choice Hotels
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.65 times more return on investment than Choice Hotels. However, American Eagle is 1.65 times more volatile than Choice Hotels International. It trades about 0.03 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.04 per unit of risk. If you would invest 1,415 in American Eagle Outfitters on September 3, 2024 and sell it today you would earn a total of 335.00 from holding American Eagle Outfitters or generate 23.67% 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. Choice Hotels International
Performance |
| Timeline |
| American Eagle Outfitters |
| Choice Hotels Intern |
American Eagle and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Choice Hotels
The main advantage of trading using opposite American Eagle and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Choice Hotels vs. Check Point Software | Choice Hotels vs. AXWAY SOFTWARE EO | Choice Hotels vs. ECHO INVESTMENT ZY | Choice Hotels vs. Take Two Interactive Software |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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