Correlation Between EMCOR and American Eagle
Can any of the company-specific risk be diversified away by investing in both EMCOR 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 EMCOR and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and American Eagle Outfitters, you can compare the effects of market volatilities on EMCOR 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 EMCOR with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and American Eagle.
Diversification Opportunities for EMCOR and American Eagle
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EMCOR and American is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR 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 EMCOR 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 EMCOR 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 EMCOR i.e., EMCOR and American Eagle go up and down completely randomly.
Pair Corralation between EMCOR and American Eagle
Considering the 90-day investment horizon EMCOR Group is expected to generate 0.73 times more return on investment than American Eagle. However, EMCOR Group is 1.37 times less risky than American Eagle. It trades about 0.14 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 per unit of risk. If you would invest 14,922 in EMCOR Group on September 3, 2024 and sell it today you would earn a total of 36,090 from holding EMCOR Group or generate 241.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. American Eagle Outfitters
Performance |
| Timeline |
| EMCOR Group |
| American Eagle Outfitters |
EMCOR and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and American Eagle
The main advantage of trading using opposite EMCOR and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR 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.The idea behind EMCOR Group and American 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.| American Eagle vs. Ross Stores | American Eagle vs. Childrens Place | American Eagle vs. Buckle Inc | American Eagle vs. Guess Inc |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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