Correlation Between Gauzy and American Eagle
Can any of the company-specific risk be diversified away by investing in both Gauzy 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 Gauzy and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gauzy Ltd Ordinary and American Eagle Outfitters, you can compare the effects of market volatilities on Gauzy 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 Gauzy with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gauzy and American Eagle.
Diversification Opportunities for Gauzy and American Eagle
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gauzy and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gauzy Ltd Ordinary 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 Gauzy 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 Gauzy Ltd Ordinary 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 Gauzy i.e., Gauzy and American Eagle go up and down completely randomly.
Pair Corralation between Gauzy and American Eagle
Given the investment horizon of 90 days Gauzy Ltd Ordinary is expected to under-perform the American Eagle. In addition to that, Gauzy is 1.71 times more volatile than American Eagle Outfitters. It trades about -0.02 of its total potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.09 per unit of volatility. If you would invest 1,914 in American Eagle Outfitters on September 5, 2024 and sell it today you would earn a total of 79.00 from holding American Eagle Outfitters or generate 4.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Gauzy Ltd Ordinary vs. American Eagle Outfitters
Performance |
| Timeline |
| Gauzy Ordinary |
| American Eagle Outfitters |
Gauzy and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gauzy and American Eagle
The main advantage of trading using opposite Gauzy and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gauzy 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 Gauzy Ltd Ordinary 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 Correlations module to find global opportunities by holding instruments from different markets.
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