Correlation Between American Eagle and ITV Plc
Can any of the company-specific risk be diversified away by investing in both American Eagle and ITV Plc 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 ITV Plc 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 ITV plc, you can compare the effects of market volatilities on American Eagle and ITV Plc 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 ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and ITV Plc.
Diversification Opportunities for American Eagle and ITV Plc
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and ITV is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc 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 ITV Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITV plc has no effect on the direction of American Eagle i.e., American Eagle and ITV Plc go up and down completely randomly.
Pair Corralation between American Eagle and ITV Plc
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 0.7 times more return on investment than ITV Plc. However, American Eagle Outfitters is 1.43 times less risky than ITV Plc. It trades about -0.15 of its potential returns per unit of risk. ITV plc is currently generating about -0.29 per unit of risk. If you would invest 1,810 in American Eagle Outfitters on August 25, 2024 and sell it today you would lose (120.00) from holding American Eagle Outfitters or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. ITV plc
Performance |
| Timeline |
| American Eagle Outfitters |
| ITV plc |
American Eagle and ITV Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and ITV Plc
The main advantage of trading using opposite American Eagle and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, ITV Plc 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 ITV Plc will offset losses from the drop in ITV Plc's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| ITV Plc vs. American Eagle Outfitters | ITV Plc vs. Strategic Education | ITV Plc vs. STRAYER EDUCATION | ITV Plc vs. Coeur Mining |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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