Correlation Between PT Steel and American Eagle
Can any of the company-specific risk be diversified away by investing in both PT Steel 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 PT Steel and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Steel Pipe and American Eagle Outfitters, you can compare the effects of market volatilities on PT Steel 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 PT Steel with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Steel and American Eagle.
Diversification Opportunities for PT Steel and American Eagle
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between S08 and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe 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 PT Steel 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 PT Steel Pipe 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 PT Steel i.e., PT Steel and American Eagle go up and down completely randomly.
Pair Corralation between PT Steel and American Eagle
Assuming the 90 days horizon PT Steel Pipe is expected to generate 2.61 times more return on investment than American Eagle. However, PT Steel is 2.61 times more volatile than American Eagle Outfitters. It trades about 0.04 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.1 per unit of risk. If you would invest 1.15 in PT Steel Pipe on October 25, 2024 and sell it today you would earn a total of 0.00 from holding PT Steel Pipe or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Steel Pipe vs. American Eagle Outfitters
Performance |
| Timeline |
| PT Steel Pipe |
| American Eagle Outfitters |
PT Steel and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Steel and American Eagle
The main advantage of trading using opposite PT Steel and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel 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.| PT Steel vs. Citic Telecom International | PT Steel vs. Singapore Telecommunications Limited | PT Steel vs. Charter Communications | PT Steel vs. Chengdu PUTIAN Telecommunications |
| American Eagle vs. Highlight Communications AG | American Eagle vs. Geely Automobile Holdings | American Eagle vs. Iridium Communications | American Eagle vs. VULCAN MATERIALS |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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