Correlation Between American Eagle and GEAR4MUSIC
Can any of the company-specific risk be diversified away by investing in both American Eagle and GEAR4MUSIC 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 GEAR4MUSIC 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on American Eagle and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and GEAR4MUSIC.
Diversification Opportunities for American Eagle and GEAR4MUSIC
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and GEAR4MUSIC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of American Eagle i.e., American Eagle and GEAR4MUSIC go up and down completely randomly.
Pair Corralation between American Eagle and GEAR4MUSIC
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the GEAR4MUSIC. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.14 times less risky than GEAR4MUSIC. The stock trades about -0.04 of its potential returns per unit of risk. The GEAR4MUSIC LS 10 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 193.00 in GEAR4MUSIC LS 10 on September 2, 2024 and sell it today you would earn a total of 2.00 from holding GEAR4MUSIC LS 10 or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. GEAR4MUSIC LS 10
Performance |
| Timeline |
| American Eagle Outfitters |
| GEAR4MUSIC LS 10 |
American Eagle and GEAR4MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and GEAR4MUSIC
The main advantage of trading using opposite American Eagle and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| GEAR4MUSIC vs. VIVA WINE GROUP | GEAR4MUSIC vs. MAGNUM MINING EXP | GEAR4MUSIC vs. Regions Financial | GEAR4MUSIC vs. The Hanover Insurance |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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