Correlation Between AM EAGLE and Spirent Communications

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

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

Diversification Opportunities for AM EAGLE and Spirent Communications

-0.51

Correlation Coefficient

AM EAGLE  Spirent Communications

Excellent diversification

The 3 months correlation between AFG and Spirent is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and AM EAGLE 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 AM EAGLE OUTFITTERS are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of AM EAGLE i.e., AM EAGLE and Spirent Communications go up and down completely randomly.

Pair Corralation between AM EAGLE and Spirent Communications

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 0.66 times more return on investment than Spirent Communications. However, AM EAGLE OUTFITTERS is 1.51 times less risky than Spirent Communications. It trades about 0.03 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.0 per unit of risk. If you would invest  1,378  in AM EAGLE OUTFITTERS on October 4, 2024 and sell it today you would earn a total of  282.00  from holding AM EAGLE OUTFITTERS or generate 20.46% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  Spirent Communications plc

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 fragile 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.

Spirent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AM EAGLE and Spirent Communications

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

The idea behind AM EAGLE OUTFITTERS and Spirent Communications plc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.