Correlation Between American Eagle and Laureate Education
Can any of the company-specific risk be diversified away by investing in both American Eagle and Laureate Education 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 Laureate Education 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 Laureate Education, you can compare the effects of market volatilities on American Eagle and Laureate Education 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 Laureate Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Laureate Education.
Diversification Opportunities for American Eagle and Laureate Education
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Laureate is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education 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 Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of American Eagle i.e., American Eagle and Laureate Education go up and down completely randomly.
Pair Corralation between American Eagle and Laureate Education
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Laureate Education. In addition to that, American Eagle is 1.65 times more volatile than Laureate Education. It trades about -0.18 of its total potential returns per unit of risk. Laureate Education is currently generating about -0.07 per unit of volatility. If you would invest 1,790 in Laureate Education on October 16, 2024 and sell it today you would lose (30.00) from holding Laureate Education or give up 1.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Laureate Education
Performance |
| Timeline |
| American Eagle Outfitters |
| Laureate Education |
American Eagle and Laureate Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Laureate Education
The main advantage of trading using opposite American Eagle and Laureate Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Laureate Education 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 Laureate Education will offset losses from the drop in Laureate Education's long position.| American Eagle vs. Sims Metal Management | American Eagle vs. Casio Computer CoLtd | American Eagle vs. LANDSEA GREEN MANAGEMENT | American Eagle vs. PKSHA TECHNOLOGY 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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