Correlation Between Oatly Group and American Eagle
Can any of the company-specific risk be diversified away by investing in both Oatly Group 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 Oatly Group and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oatly Group AB and American Eagle Outfitters, you can compare the effects of market volatilities on Oatly Group 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 Oatly Group with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oatly Group and American Eagle.
Diversification Opportunities for Oatly Group and American Eagle
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oatly and American is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB 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 Oatly Group 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 Oatly Group AB 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 Oatly Group i.e., Oatly Group and American Eagle go up and down completely randomly.
Pair Corralation between Oatly Group and American Eagle
Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the American Eagle. In addition to that, Oatly Group is 1.61 times more volatile than American Eagle Outfitters. It trades about -0.09 of its total potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.05 per unit of volatility. If you would invest 2,433 in American Eagle Outfitters on September 3, 2024 and sell it today you would lose (509.00) from holding American Eagle Outfitters or give up 20.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oatly Group AB vs. American Eagle Outfitters
Performance |
| Timeline |
| Oatly Group AB |
| American Eagle Outfitters |
Oatly Group and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oatly Group and American Eagle
The main advantage of trading using opposite Oatly Group and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group 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.| Oatly Group vs. Monster Beverage Corp | Oatly Group vs. Vita Coco | Oatly Group vs. PepsiCo | Oatly Group vs. The Coca Cola |
| 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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