Correlation Between KAR Auction and American Eagle
Can any of the company-specific risk be diversified away by investing in both KAR Auction 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 KAR Auction and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAR Auction Services and American Eagle Outfitters, you can compare the effects of market volatilities on KAR Auction 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 KAR Auction with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and American Eagle.
Diversification Opportunities for KAR Auction and American Eagle
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KAR and American is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services 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 KAR Auction 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 KAR Auction Services 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 KAR Auction i.e., KAR Auction and American Eagle go up and down completely randomly.
Pair Corralation between KAR Auction and American Eagle
Assuming the 90 days horizon KAR Auction Services is expected to generate 0.74 times more return on investment than American Eagle. However, KAR Auction Services is 1.35 times less risky than American Eagle. It trades about 0.13 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.02 per unit of risk. If you would invest 1,550 in KAR Auction Services on November 2, 2024 and sell it today you would earn a total of 420.00 from holding KAR Auction Services or generate 27.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. American Eagle Outfitters
Performance |
| Timeline |
| KAR Auction Services |
| American Eagle Outfitters |
KAR Auction and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and American Eagle
The main advantage of trading using opposite KAR Auction and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction 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.| KAR Auction vs. Chiba Bank | KAR Auction vs. Warner Music Group | KAR Auction vs. Canadian Utilities Limited | KAR Auction vs. Direct Line Insurance |
| American Eagle vs. Autohome ADR | American Eagle vs. HOME DEPOT | American Eagle vs. UMC Electronics Co | American Eagle vs. STMICROELECTRONICS |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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