Correlation Between NEXT Plc and American Eagle
Can any of the company-specific risk be diversified away by investing in both NEXT 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 NEXT 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 NEXT plc and American Eagle Outfitters, you can compare the effects of market volatilities on NEXT 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 NEXT Plc with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXT Plc and American Eagle.
Diversification Opportunities for NEXT Plc and American Eagle
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NEXT and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NEXT 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 NEXT 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 NEXT 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 NEXT Plc i.e., NEXT Plc and American Eagle go up and down completely randomly.
Pair Corralation between NEXT Plc and American Eagle
Assuming the 90 days horizon NEXT plc is expected to generate 0.71 times more return on investment than American Eagle. However, NEXT plc is 1.41 times less risky than American Eagle. It trades about -0.06 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.07 per unit of risk. If you would invest 12,230 in NEXT plc on September 1, 2024 and sell it today you would lose (320.00) from holding NEXT plc or give up 2.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NEXT plc vs. American Eagle Outfitters
Performance |
| Timeline |
| NEXT plc |
| American Eagle Outfitters |
NEXT Plc and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXT Plc and American Eagle
The main advantage of trading using opposite NEXT Plc and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXT 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.| NEXT Plc vs. SCOTT TECHNOLOGY | NEXT Plc vs. Astral Foods Limited | NEXT Plc vs. CAL MAINE FOODS | NEXT Plc vs. Nok Airlines PCL |
| American Eagle vs. Superior Plus Corp | American Eagle vs. Origin Agritech | American Eagle vs. Identiv | American Eagle vs. INTUITIVE SURGICAL |
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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