Correlation Between United States and American Eagle
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and American Eagle Outfitters, you can compare the effects of market volatilities on United States 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 United States with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and American Eagle.
Diversification Opportunities for United States and American Eagle
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and American Eagle go up and down completely randomly.
Pair Corralation between United States and American Eagle
Taking into account the 90-day investment horizon United States Steel is expected to generate 1.19 times more return on investment than American Eagle. However, United States is 1.19 times more volatile than American Eagle Outfitters. It trades about 0.03 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 per unit of risk. If you would invest 2,574 in United States Steel on September 12, 2024 and sell it today you would earn a total of 948.00 from holding United States Steel or generate 36.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. American Eagle Outfitters
Performance |
| Timeline |
| United States Steel |
| American Eagle Outfitters |
United States and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and American Eagle
The main advantage of trading using opposite United States and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
| American Eagle vs. Foot Locker | American Eagle vs. Lands End | American Eagle vs. Duluth Holdings | American Eagle vs. Destination XL Group |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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