Correlation Between AM EAGLE and Smurfit Kappa

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

Diversification Opportunities for AM EAGLE and Smurfit Kappa

-0.7

Correlation Coefficient

AM EAGLE  Smurfit Kappa

Excellent diversification

The 3 months correlation between AFG and Smurfit is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group 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 Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of AM EAGLE i.e., AM EAGLE and Smurfit Kappa go up and down completely randomly.

Pair Corralation between AM EAGLE and Smurfit Kappa

Assuming the 90 days trading horizon AM EAGLE is expected to generate 1.32 times less return on investment than Smurfit Kappa. In addition to that, AM EAGLE is 1.24 times more volatile than Smurfit Kappa Group. It trades about 0.03 of its total potential returns per unit of risk. Smurfit Kappa Group is currently generating about 0.04 per unit of volatility. If you would invest  3,527  in Smurfit Kappa Group on October 4, 2024 and sell it today you would earn a total of  1,643  from holding Smurfit Kappa Group or generate 46.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

AM EAGLE OUTFITTERS  vs.  Smurfit Kappa Group

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.

Smurfit Kappa Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AM EAGLE and Smurfit Kappa

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

The idea behind AM EAGLE OUTFITTERS and Smurfit Kappa Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.