Correlation Between Volkswagen and American Eagle
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and American Eagle Outfitters, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and American Eagle.
Diversification Opportunities for Volkswagen and American Eagle
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and American is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 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 Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and American Eagle go up and down completely randomly.
Pair Corralation between Volkswagen and American Eagle
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 1.03 times more return on investment than American Eagle. However, Volkswagen is 1.03 times more volatile than American Eagle Outfitters. It trades about 0.18 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.54 per unit of risk. If you would invest 10,070 in Volkswagen AG on November 29, 2024 and sell it today you would earn a total of 790.00 from holding Volkswagen AG or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. American Eagle Outfitters
Performance |
| Timeline |
| Volkswagen AG |
| American Eagle Outfitters |
Volkswagen and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and American Eagle
The main advantage of trading using opposite Volkswagen and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. Genertec Universal Medical | Volkswagen vs. UNITED RENTALS | Volkswagen vs. PULSION Medical Systems | Volkswagen vs. China Medical System |
| American Eagle vs. Warner Music Group | American Eagle vs. UNIVERSAL MUSIC GROUP | American Eagle vs. alstria office REIT AG | American Eagle vs. GEELY AUTOMOBILE |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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