Correlation Between GEAR4MUSIC and American Eagle
Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC 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 GEAR4MUSIC and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEAR4MUSIC LS 10 and American Eagle Outfitters, you can compare the effects of market volatilities on GEAR4MUSIC 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 GEAR4MUSIC with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and American Eagle.
Diversification Opportunities for GEAR4MUSIC and American Eagle
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GEAR4MUSIC and American is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 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 GEAR4MUSIC 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 GEAR4MUSIC LS 10 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 GEAR4MUSIC i.e., GEAR4MUSIC and American Eagle go up and down completely randomly.
Pair Corralation between GEAR4MUSIC and American Eagle
Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to generate 1.13 times more return on investment than American Eagle. However, GEAR4MUSIC is 1.13 times more volatile than American Eagle Outfitters. It trades about -0.01 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.1 per unit of risk. If you would invest 197.00 in GEAR4MUSIC LS 10 on August 31, 2024 and sell it today you would lose (2.00) from holding GEAR4MUSIC LS 10 or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GEAR4MUSIC LS 10 vs. American Eagle Outfitters
Performance |
| Timeline |
| GEAR4MUSIC LS 10 |
| American Eagle Outfitters |
GEAR4MUSIC and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GEAR4MUSIC and American Eagle
The main advantage of trading using opposite GEAR4MUSIC and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC 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.| GEAR4MUSIC vs. ETFS Coffee ETC | GEAR4MUSIC vs. JAPAN TOBACCO UNSPADR12 | GEAR4MUSIC vs. ScanSource | GEAR4MUSIC vs. Hanison Construction Holdings |
| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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