Correlation Between American Eagle and ORIX
Can any of the company-specific risk be diversified away by investing in both American Eagle and ORIX 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 ORIX 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 ORIX Corporation, you can compare the effects of market volatilities on American Eagle and ORIX 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 ORIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and ORIX.
Diversification Opportunities for American Eagle and ORIX
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and ORIX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX 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 ORIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX has no effect on the direction of American Eagle i.e., American Eagle and ORIX go up and down completely randomly.
Pair Corralation between American Eagle and ORIX
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the ORIX. In addition to that, American Eagle is 1.2 times more volatile than ORIX Corporation. It trades about -0.47 of its total potential returns per unit of risk. ORIX Corporation is currently generating about -0.08 per unit of volatility. If you would invest 2,020 in ORIX Corporation on December 1, 2024 and sell it today you would lose (70.00) from holding ORIX Corporation or give up 3.47% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
American Eagle Outfitters vs. ORIX Corp.
Performance |
Timeline |
American Eagle Outfitters |
ORIX |
American Eagle and ORIX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Eagle and ORIX
The main advantage of trading using opposite American Eagle and ORIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, ORIX 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 ORIX will offset losses from the drop in ORIX's long position.American Eagle vs. HUTCHISON TELECOMM | American Eagle vs. Chengdu PUTIAN Telecommunications | American Eagle vs. The Yokohama Rubber | American Eagle vs. NEWELL RUBBERMAID |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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