Correlation Between AM EAGLE and ETFS Coffee

Can any of the company-specific risk be diversified away by investing in both AM EAGLE and ETFS Coffee 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 ETFS Coffee 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 ETFS Coffee ETC, you can compare the effects of market volatilities on AM EAGLE and ETFS Coffee 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 ETFS Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and ETFS Coffee.

Diversification Opportunities for AM EAGLE and ETFS Coffee

-0.62

Correlation Coefficient

AM EAGLE  ETFS Coffee

Excellent diversification

The 3 months correlation between AFG and ETFS is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC 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 ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of AM EAGLE i.e., AM EAGLE and ETFS Coffee go up and down completely randomly.

Pair Corralation between AM EAGLE and ETFS Coffee

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the ETFS Coffee. But the stock apears to be less risky and, when comparing its historical volatility, AM EAGLE OUTFITTERS is 1.31 times less risky than ETFS Coffee. The stock trades about -0.09 of its potential returns per unit of risk. The ETFS Coffee ETC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,054  in ETFS Coffee ETC on October 7, 2024 and sell it today you would earn a total of  127.00  from holding ETFS Coffee ETC or generate 2.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.24%
Values	Daily Returns

AM EAGLE OUTFITTERS  vs.  ETFS Coffee ETC

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 latest unsteady 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.

ETFS Coffee ETC

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ETFS Coffee ETC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AM EAGLE and ETFS Coffee

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

The idea behind AM EAGLE OUTFITTERS and ETFS Coffee ETC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.