Correlation Between AIR LIQUIDE and AM EAGLE
Can any of the company-specific risk be diversified away by investing in both AIR LIQUIDE and AM EAGLE 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 AIR LIQUIDE and AM EAGLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR LIQUIDE ADR and AM EAGLE OUTFITTERS, you can compare the effects of market volatilities on AIR LIQUIDE and AM EAGLE 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 AIR LIQUIDE with a short position of AM EAGLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR LIQUIDE and AM EAGLE.
Diversification Opportunities for AIR LIQUIDE and AM EAGLE
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AIR and AFG is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding AIR LIQUIDE ADR and AM EAGLE OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AM EAGLE OUTFITTERS and AIR LIQUIDE 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 AIR LIQUIDE ADR are associated (or correlated) with AM EAGLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AM EAGLE OUTFITTERS has no effect on the direction of AIR LIQUIDE i.e., AIR LIQUIDE and AM EAGLE go up and down completely randomly.
Pair Corralation between AIR LIQUIDE and AM EAGLE
Assuming the 90 days trading horizon AIR LIQUIDE ADR is expected to under-perform the AM EAGLE. But the stock apears to be less risky and, when comparing its historical volatility, AIR LIQUIDE ADR is 3.85 times less risky than AM EAGLE. The stock trades about -0.29 of its potential returns per unit of risk. The AM EAGLE OUTFITTERS is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,760 in AM EAGLE OUTFITTERS on September 4, 2024 and sell it today you would earn a total of 160.00 from holding AM EAGLE OUTFITTERS or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR LIQUIDE ADR vs. AM EAGLE OUTFITTERS
Performance |
| Timeline |
| AIR LIQUIDE ADR |
| AM EAGLE OUTFITTERS |
AIR LIQUIDE and AM EAGLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR LIQUIDE and AM EAGLE
The main advantage of trading using opposite AIR LIQUIDE and AM EAGLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR LIQUIDE position performs unexpectedly, AM EAGLE 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 AM EAGLE will offset losses from the drop in AM EAGLE's long position.The idea behind AIR LIQUIDE ADR and AM EAGLE OUTFITTERS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Stocks Directory module to find actively traded stocks across global markets.
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