Correlation Between ArcelorMittal and American Eagle
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal 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 ArcelorMittal and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal SA ADR and American Eagle Outfitters, you can compare the effects of market volatilities on ArcelorMittal 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 ArcelorMittal with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and American Eagle.
Diversification Opportunities for ArcelorMittal and American Eagle
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ArcelorMittal and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR 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 ArcelorMittal 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 ArcelorMittal SA ADR 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 ArcelorMittal i.e., ArcelorMittal and American Eagle go up and down completely randomly.
Pair Corralation between ArcelorMittal and American Eagle
Allowing for the 90-day total investment horizon ArcelorMittal is expected to generate 11.93 times less return on investment than American Eagle. But when comparing it to its historical volatility, ArcelorMittal SA ADR is 1.35 times less risky than American Eagle. It trades about 0.0 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,479 in American Eagle Outfitters on September 3, 2024 and sell it today you would earn a total of 445.00 from holding American Eagle Outfitters or generate 30.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ArcelorMittal SA ADR vs. American Eagle Outfitters
Performance |
| Timeline |
| ArcelorMittal SA ADR |
| American Eagle Outfitters |
ArcelorMittal and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and American Eagle
The main advantage of trading using opposite ArcelorMittal and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal 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.| ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
| American Eagle vs. Ross Stores | American Eagle vs. Childrens Place | American Eagle vs. Buckle Inc | American Eagle vs. Guess 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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