Correlation Between Beazer Homes and American Eagle
Can any of the company-specific risk be diversified away by investing in both Beazer Homes 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 Beazer Homes and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beazer Homes USA and American Eagle Outfitters, you can compare the effects of market volatilities on Beazer Homes 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 Beazer Homes with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and American Eagle.
Diversification Opportunities for Beazer Homes and American Eagle
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Beazer and American is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA 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 Beazer Homes 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 Beazer Homes USA 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 Beazer Homes i.e., Beazer Homes and American Eagle go up and down completely randomly.
Pair Corralation between Beazer Homes and American Eagle
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.02 times more return on investment than American Eagle. However, Beazer Homes is 1.02 times more volatile than American Eagle Outfitters. It trades about 0.09 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.05 per unit of risk. If you would invest 2,660 in Beazer Homes USA on October 23, 2024 and sell it today you would earn a total of 80.00 from holding Beazer Homes USA or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.12% |
| Values | Daily Returns |
Beazer Homes USA vs. American Eagle Outfitters
Performance |
| Timeline |
| Beazer Homes USA |
| American Eagle Outfitters |
Beazer Homes and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and American Eagle
The main advantage of trading using opposite Beazer Homes and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes 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.| Beazer Homes vs. DR Horton | Beazer Homes vs. Lennar | Beazer Homes vs. NVR Inc | Beazer Homes vs. Sekisui House |
| American Eagle vs. Haier Smart Home | American Eagle vs. Beazer Homes USA | American Eagle vs. CAIRN HOMES EO | American Eagle vs. Fair Isaac Corp |
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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