Correlation Between American Eagle and Transportadora
Can any of the company-specific risk be diversified away by investing in both American Eagle and Transportadora 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 Transportadora 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 Transportadora de Gas, you can compare the effects of market volatilities on American Eagle and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Transportadora.
Diversification Opportunities for American Eagle and Transportadora
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Transportadora is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of American Eagle i.e., American Eagle and Transportadora go up and down completely randomly.
Pair Corralation between American Eagle and Transportadora
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Transportadora. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 2.88 times less risky than Transportadora. The stock trades about 0.0 of its potential returns per unit of risk. The Transportadora de Gas is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,020 in Transportadora de Gas on September 3, 2024 and sell it today you would earn a total of 840.00 from holding Transportadora de Gas or generate 41.58% 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. Transportadora de Gas
Performance |
| Timeline |
| American Eagle Outfitters |
| Transportadora de Gas |
American Eagle and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Transportadora
The main advantage of trading using opposite American Eagle and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Transportadora vs. COPLAND ROAD CAPITAL | Transportadora vs. H FARM SPA | Transportadora vs. BII Railway Transportation | Transportadora vs. Penta Ocean Construction Co |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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