Correlation Between American Eagle and Microsoft
Can any of the company-specific risk be diversified away by investing in both American Eagle and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on American Eagle and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Microsoft.
Diversification Opportunities for American Eagle and Microsoft
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Microsoft is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of American Eagle i.e., American Eagle and Microsoft go up and down completely randomly.
Pair Corralation between American Eagle and Microsoft
Assuming the 90 days trading horizon American Eagle is expected to generate 1.88 times less return on investment than Microsoft. In addition to that, American Eagle is 2.08 times more volatile than Microsoft. It trades about 0.03 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest 21,808 in Microsoft on October 15, 2024 and sell it today you would earn a total of 19,377 from holding Microsoft or generate 88.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Microsoft
Performance |
| Timeline |
| American Eagle Outfitters |
| Microsoft |
American Eagle and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Microsoft
The main advantage of trading using opposite American Eagle and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft'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 |
| Microsoft vs. PURETECH HEALTH PLC | Microsoft vs. WESANA HEALTH HOLD | Microsoft vs. Phibro Animal Health | Microsoft vs. CarsalesCom |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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