Correlation Between Apple and American Eagle
Can any of the company-specific risk be diversified away by investing in both Apple and American 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 Apple and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and American Eagle Outfitters, you can compare the effects of market volatilities on Apple and American 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 Apple with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and American Eagle.
Diversification Opportunities for Apple and American Eagle
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Apple and American is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and Apple 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 Apple Inc are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Apple i.e., Apple and American Eagle go up and down completely randomly.
Pair Corralation between Apple and American Eagle
Assuming the 90 days trading horizon Apple Inc is expected to under-perform the American Eagle. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.19 times less risky than American Eagle. The stock trades about -0.15 of its potential returns per unit of risk. The American Eagle Outfitters is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 1,657 in American Eagle Outfitters on November 6, 2024 and sell it today you would lose (87.00) from holding American Eagle Outfitters or give up 5.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. American Eagle Outfitters
Performance |
| Timeline |
| Apple Inc |
| American Eagle Outfitters |
Apple and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and American Eagle
The main advantage of trading using opposite Apple and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, American 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 American Eagle will offset losses from the drop in American Eagle's long position.| Apple vs. DELTA AIR LINES | Apple vs. Ryanair Holdings plc | Apple vs. Lendlease Group | Apple vs. ALBIS LEASING AG |
| American Eagle vs. COSMOSTEEL HLDGS | American Eagle vs. British American Tobacco | American Eagle vs. Tencent Music Entertainment | American Eagle vs. Daido Steel 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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