Correlation Between American Eagle and STORE ELECTRONIC
Can any of the company-specific risk be diversified away by investing in both American Eagle and STORE ELECTRONIC 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 STORE ELECTRONIC 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 STORE ELECTRONIC, you can compare the effects of market volatilities on American Eagle and STORE ELECTRONIC 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 STORE ELECTRONIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and STORE ELECTRONIC.
Diversification Opportunities for American Eagle and STORE ELECTRONIC
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and STORE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of American Eagle i.e., American Eagle and STORE ELECTRONIC go up and down completely randomly.
Pair Corralation between American Eagle and STORE ELECTRONIC
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the STORE ELECTRONIC. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.11 times less risky than STORE ELECTRONIC. The stock trades about -0.05 of its potential returns per unit of risk. The STORE ELECTRONIC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 15,106 in STORE ELECTRONIC on September 3, 2024 and sell it today you would lose (1,086) from holding STORE ELECTRONIC or give up 7.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. STORE ELECTRONIC
Performance |
| Timeline |
| American Eagle Outfitters |
| STORE ELECTRONIC |
American Eagle and STORE ELECTRONIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and STORE ELECTRONIC
The main advantage of trading using opposite American Eagle and STORE ELECTRONIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, STORE ELECTRONIC 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 STORE ELECTRONIC will offset losses from the drop in STORE ELECTRONIC's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| STORE ELECTRONIC vs. TOTAL GABON | STORE ELECTRONIC vs. Walgreens Boots Alliance | STORE ELECTRONIC vs. Peak Resources Limited |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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