Correlation Between American Eagle and Playtech Plc
Can any of the company-specific risk be diversified away by investing in both American Eagle and Playtech 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 Playtech 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 Playtech plc, you can compare the effects of market volatilities on American Eagle and Playtech 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Playtech Plc.
Diversification Opportunities for American Eagle and Playtech Plc
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Playtech is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of American Eagle i.e., American Eagle and Playtech Plc go up and down completely randomly.
Pair Corralation between American Eagle and Playtech Plc
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Playtech Plc. In addition to that, American Eagle is 2.36 times more volatile than Playtech plc. It trades about -0.04 of its total potential returns per unit of risk. Playtech plc is currently generating about 0.03 per unit of volatility. If you would invest 861.00 in Playtech plc on September 2, 2024 and sell it today you would earn a total of 4.00 from holding Playtech plc or generate 0.46% 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. Playtech plc
Performance |
| Timeline |
| American Eagle Outfitters |
| Playtech plc |
American Eagle and Playtech Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Playtech Plc
The main advantage of trading using opposite American Eagle and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Playtech 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 Playtech Plc will offset losses from the drop in Playtech Plc's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Playtech Plc vs. Apple Inc | Playtech Plc vs. Apple Inc | Playtech Plc vs. Apple Inc | Playtech Plc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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