Correlation Between CHINA EDUCATION and American Eagle
Can any of the company-specific risk be diversified away by investing in both CHINA EDUCATION 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 CHINA EDUCATION and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA EDUCATION GROUP and American Eagle Outfitters, you can compare the effects of market volatilities on CHINA EDUCATION 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 CHINA EDUCATION with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and American Eagle.
Diversification Opportunities for CHINA EDUCATION and American Eagle
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and American is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP 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 CHINA EDUCATION 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 CHINA EDUCATION GROUP 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 CHINA EDUCATION i.e., CHINA EDUCATION and American Eagle go up and down completely randomly.
Pair Corralation between CHINA EDUCATION and American Eagle
Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to under-perform the American Eagle. But the stock apears to be less risky and, when comparing its historical volatility, CHINA EDUCATION GROUP is 1.1 times less risky than American Eagle. The stock trades about -0.11 of its potential returns per unit of risk. The American Eagle Outfitters is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,568 in American Eagle Outfitters on October 26, 2024 and sell it today you would earn a total of 72.00 from holding American Eagle Outfitters or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA EDUCATION GROUP vs. American Eagle Outfitters
Performance |
| Timeline |
| CHINA EDUCATION GROUP |
| American Eagle Outfitters |
CHINA EDUCATION and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA EDUCATION and American Eagle
The main advantage of trading using opposite CHINA EDUCATION and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION 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.| CHINA EDUCATION vs. Apple Inc | CHINA EDUCATION vs. Apple Inc | CHINA EDUCATION vs. Apple Inc | CHINA EDUCATION vs. Apple Inc |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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