Correlation Between ITV Plc and American Eagle
Can any of the company-specific risk be diversified away by investing in both ITV Plc 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 ITV Plc and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITV plc and American Eagle Outfitters, you can compare the effects of market volatilities on ITV Plc 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 ITV Plc with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV Plc and American Eagle.
Diversification Opportunities for ITV Plc and American Eagle
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ITV and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc 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 ITV Plc 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 ITV plc 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 ITV Plc i.e., ITV Plc and American Eagle go up and down completely randomly.
Pair Corralation between ITV Plc and American Eagle
Assuming the 90 days horizon ITV plc is expected to under-perform the American Eagle. In addition to that, ITV Plc is 1.46 times more volatile than American Eagle Outfitters. It trades about -0.29 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 1,810 in American Eagle Outfitters on August 25, 2024 and sell it today you would lose (120.00) from holding American Eagle Outfitters or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ITV plc vs. American Eagle Outfitters
Performance |
| Timeline |
| ITV plc |
| American Eagle Outfitters |
ITV Plc and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITV Plc and American Eagle
The main advantage of trading using opposite ITV Plc and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV Plc 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.| ITV Plc vs. American Eagle Outfitters | ITV Plc vs. Strategic Education | ITV Plc vs. STRAYER EDUCATION | ITV Plc vs. Coeur Mining |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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