Correlation Between TRI CHEMICAL and American Eagle

Can any of the company-specific risk be diversified away by investing in both TRI CHEMICAL 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 TRI CHEMICAL and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRI CHEMICAL LABORATINC and American Eagle Outfitters, you can compare the effects of market volatilities on TRI CHEMICAL 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 TRI CHEMICAL with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRI CHEMICAL and American Eagle.

Diversification Opportunities for TRI CHEMICAL and American Eagle

-0.14

Correlation Coefficient

TRI CHEMICAL  American Eagle

Good diversification

The 3 months correlation between TRI and American is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding TRI CHEMICAL LABORATINC 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 TRI CHEMICAL 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 TRI CHEMICAL LABORATINC 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 TRI CHEMICAL i.e., TRI CHEMICAL and American Eagle go up and down completely randomly.

Pair Corralation between TRI CHEMICAL and American Eagle

Assuming the 90 days horizon TRI CHEMICAL LABORATINC is expected to generate 1.09 times more return on investment than American Eagle. However, TRI CHEMICAL is 1.09 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 0.02 per unit of risk. If you would invest  1,658  in TRI CHEMICAL LABORATINC on October 25, 2024 and sell it today you would earn a total of  402.00  from holding TRI CHEMICAL LABORATINC or generate 24.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TRI CHEMICAL LABORATINC  vs.  American Eagle Outfitters

TRI CHEMICAL LABORATINC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TRI CHEMICAL LABORATINC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, TRI CHEMICAL reported solid returns over the last few months and may actually be approaching a breakup point.

American Eagle Outfitters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Eagle Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with TRI CHEMICAL and American Eagle

The main advantage of trading using opposite TRI CHEMICAL and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRI CHEMICAL 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.

The idea behind TRI CHEMICAL LABORATINC and American Eagle Outfitters pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.