Correlation Between Fluent and American Eagle
Can any of the company-specific risk be diversified away by investing in both Fluent 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 Fluent and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fluent Inc and American Eagle Outfitters, you can compare the effects of market volatilities on Fluent 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 Fluent with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fluent and American Eagle.
Diversification Opportunities for Fluent and American Eagle
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fluent and American is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fluent 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 Fluent 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 Fluent 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 Fluent i.e., Fluent and American Eagle go up and down completely randomly.
Pair Corralation between Fluent and American Eagle
Given the investment horizon of 90 days Fluent Inc is expected to under-perform the American Eagle. In addition to that, Fluent is 1.86 times more volatile than American Eagle Outfitters. It trades about -0.11 of its total potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.14 per unit of volatility. If you would invest 2,005 in American Eagle Outfitters on August 30, 2024 and sell it today you would lose (147.00) from holding American Eagle Outfitters or give up 7.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fluent Inc vs. American Eagle Outfitters
Performance |
| Timeline |
| Fluent Inc |
| American Eagle Outfitters |
Fluent and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fluent and American Eagle
The main advantage of trading using opposite Fluent and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluent 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 Fluent Inc 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. Urban Outfitters | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place | American Eagle vs. Abercrombie Fitch |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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