Correlation Between American Eagle and MAGIC SOFTWARE

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

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

Diversification Opportunities for American Eagle and MAGIC SOFTWARE

-0.18

Correlation Coefficient

American Eagle  MAGIC SOFTWARE

Good diversification

The 3 months correlation between American and MAGIC is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and MAGIC SOFTWARE ENTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGIC SOFTWARE ENTR and American 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 American Eagle Outfitters are associated (or correlated) with MAGIC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGIC SOFTWARE ENTR has no effect on the direction of American Eagle i.e., American Eagle and MAGIC SOFTWARE go up and down completely randomly.

Pair Corralation between American Eagle and MAGIC SOFTWARE

Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the MAGIC SOFTWARE. In addition to that, American Eagle is 1.35 times more volatile than MAGIC SOFTWARE ENTR. It trades about -0.19 of its total potential returns per unit of risk. MAGIC SOFTWARE ENTR is currently generating about 0.09 per unit of volatility. If you would invest  1,120  in MAGIC SOFTWARE ENTR on December 21, 2024 and sell it today you would earn a total of  120.00  from holding MAGIC SOFTWARE ENTR or generate 10.71% return on investment over 90 days.

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

American Eagle Outfitters  vs.  MAGIC SOFTWARE ENTR

American Eagle Outfitters

Risk-Adjusted Performance

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 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

MAGIC SOFTWARE ENTR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAGIC SOFTWARE ENTR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAGIC SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Eagle and MAGIC SOFTWARE

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

The idea behind American Eagle Outfitters and MAGIC SOFTWARE ENTR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.