Correlation Between NorAm Drilling and American Eagle
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling 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 NorAm Drilling and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorAm Drilling AS and American Eagle Outfitters, you can compare the effects of market volatilities on NorAm Drilling 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 NorAm Drilling with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and American Eagle.
Diversification Opportunities for NorAm Drilling and American Eagle
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorAm and American is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS 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 NorAm Drilling 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 NorAm Drilling AS 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 NorAm Drilling i.e., NorAm Drilling and American Eagle go up and down completely randomly.
Pair Corralation between NorAm Drilling and American Eagle
Assuming the 90 days horizon NorAm Drilling AS is expected to under-perform the American Eagle. In addition to that, NorAm Drilling is 1.95 times more volatile than American Eagle Outfitters. It trades about -0.02 of its total potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.03 per unit of volatility. If you would invest 1,993 in American Eagle Outfitters on September 1, 2024 and sell it today you would lose (243.00) from holding American Eagle Outfitters or give up 12.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. American Eagle Outfitters
Performance |
| Timeline |
| NorAm Drilling AS |
| American Eagle Outfitters |
NorAm Drilling and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and American Eagle
The main advantage of trading using opposite NorAm Drilling and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling 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.| NorAm Drilling vs. Martin Marietta Materials | NorAm Drilling vs. Reinsurance Group of | NorAm Drilling vs. ZURICH INSURANCE GROUP | NorAm Drilling vs. LIFENET INSURANCE CO |
| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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