Correlation Between Mount Gibson and American Eagle
Can any of the company-specific risk be diversified away by investing in both Mount Gibson 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 Mount Gibson and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mount Gibson Iron and American Eagle Outfitters, you can compare the effects of market volatilities on Mount Gibson 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 Mount Gibson with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and American Eagle.
Diversification Opportunities for Mount Gibson and American Eagle
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mount and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron 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 Mount Gibson 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 Mount Gibson Iron 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 Mount Gibson i.e., Mount Gibson and American Eagle go up and down completely randomly.
Pair Corralation between Mount Gibson and American Eagle
Assuming the 90 days horizon Mount Gibson Iron is expected to generate 1.55 times more return on investment than American Eagle. However, Mount Gibson is 1.55 times more volatile than American Eagle Outfitters. It trades about 0.18 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.11 per unit of risk. If you would invest 17.00 in Mount Gibson Iron on October 26, 2024 and sell it today you would earn a total of 2.00 from holding Mount Gibson Iron or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mount Gibson Iron vs. American Eagle Outfitters
Performance |
| Timeline |
| Mount Gibson Iron |
| American Eagle Outfitters |
Mount Gibson and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mount Gibson and American Eagle
The main advantage of trading using opposite Mount Gibson and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson 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.| Mount Gibson vs. GREENX METALS LTD | Mount Gibson vs. Major Drilling Group | Mount Gibson vs. Perseus Mining Limited | Mount Gibson vs. Jacquet Metal Service |
| American Eagle vs. Phibro Animal Health | American Eagle vs. CHINA EDUCATION GROUP | American Eagle vs. PURETECH HEALTH PLC | American Eagle vs. Perdoceo Education |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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