Correlation Between American Eagle and Waste Management
Can any of the company-specific risk be diversified away by investing in both American Eagle and Waste Management 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 Waste Management 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 Waste Management, you can compare the effects of market volatilities on American Eagle and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Waste Management.
Diversification Opportunities for American Eagle and Waste Management
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Waste is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of American Eagle i.e., American Eagle and Waste Management go up and down completely randomly.
Pair Corralation between American Eagle and Waste Management
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 2.44 times more return on investment than Waste Management. However, American Eagle is 2.44 times more volatile than Waste Management. It trades about 0.03 of its potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of risk. If you would invest 1,415 in American Eagle Outfitters on September 3, 2024 and sell it today you would earn a total of 335.00 from holding American Eagle Outfitters or generate 23.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Waste Management
Performance |
| Timeline |
| American Eagle Outfitters |
| Waste Management |
American Eagle and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Waste Management
The main advantage of trading using opposite American Eagle and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
| Waste Management vs. ANTA SPORTS PRODUCT | Waste Management vs. Gaztransport Technigaz SA | Waste Management vs. SCIENCE IN SPORT | Waste Management vs. SPORTING |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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