Correlation Between American Eagle and Lendlease
Can any of the company-specific risk be diversified away by investing in both American Eagle and Lendlease 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 Lendlease 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 Lendlease Group, you can compare the effects of market volatilities on American Eagle and Lendlease 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 Lendlease. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Lendlease.
Diversification Opportunities for American Eagle and Lendlease
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Lendlease is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of American Eagle i.e., American Eagle and Lendlease go up and down completely randomly.
Pair Corralation between American Eagle and Lendlease
Assuming the 90 days trading horizon American Eagle is expected to generate 1.01 times less return on investment than Lendlease. In addition to that, American Eagle is 1.81 times more volatile than Lendlease Group. It trades about 0.13 of its total potential returns per unit of risk. Lendlease Group is currently generating about 0.24 per unit of volatility. If you would invest 406.00 in Lendlease Group on September 5, 2024 and sell it today you would earn a total of 31.00 from holding Lendlease Group or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Eagle Outfitters vs. Lendlease Group
Performance |
| Timeline |
| American Eagle Outfitters |
| Lendlease Group |
American Eagle and Lendlease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Lendlease
The main advantage of trading using opposite American Eagle and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Lendlease 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 Lendlease will offset losses from the drop in Lendlease's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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