Correlation Between ARISTOCRAT LEISURE and AM EAGLE

Can any of the company-specific risk be diversified away by investing in both ARISTOCRAT LEISURE and AM 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 ARISTOCRAT LEISURE and AM EAGLE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARISTOCRAT LEISURE and AM EAGLE OUTFITTERS, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and AM 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 ARISTOCRAT LEISURE with a short position of AM EAGLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and AM EAGLE.

Diversification Opportunities for ARISTOCRAT LEISURE and AM EAGLE

-0.75

Correlation Coefficient

ARISTOCRAT LEISURE  AM EAGLE

Pay attention - limited upside

The 3 months correlation between ARISTOCRAT and AFG is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and AM EAGLE OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AM EAGLE OUTFITTERS and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE are associated (or correlated) with AM EAGLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AM EAGLE OUTFITTERS has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and AM EAGLE go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and AM EAGLE

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 0.39 times more return on investment than AM EAGLE. However, ARISTOCRAT LEISURE is 2.59 times less risky than AM EAGLE. It trades about 0.15 of its potential returns per unit of risk. AM EAGLE OUTFITTERS is currently generating about 0.03 per unit of risk. If you would invest  1,997  in ARISTOCRAT LEISURE on October 11, 2024 and sell it today you would earn a total of  2,303  from holding ARISTOCRAT LEISURE or generate 115.32% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  AM EAGLE OUTFITTERS

ARISTOCRAT LEISURE

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ARISTOCRAT LEISURE and AM EAGLE

The main advantage of trading using opposite ARISTOCRAT LEISURE and AM EAGLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARISTOCRAT LEISURE position performs unexpectedly, AM 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 AM EAGLE will offset losses from the drop in AM EAGLE's long position.

The idea behind ARISTOCRAT LEISURE and AM 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.