Correlation Between AM EAGLE and UPDATE SOFTWARE

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

Diversification Opportunities for AM EAGLE and UPDATE SOFTWARE

-0.75

Correlation Coefficient

AM EAGLE  UPDATE SOFTWARE

Pay attention - limited upside

The 3 months correlation between AFG and UPDATE is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and UPDATE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPDATE SOFTWARE 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 UPDATE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPDATE SOFTWARE has no effect on the direction of AM EAGLE i.e., AM EAGLE and UPDATE SOFTWARE go up and down completely randomly.

Pair Corralation between AM EAGLE and UPDATE SOFTWARE

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the UPDATE SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, AM EAGLE OUTFITTERS is 1.44 times less risky than UPDATE SOFTWARE. The stock trades about -0.06 of its potential returns per unit of risk. The UPDATE SOFTWARE is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  953.00  in UPDATE SOFTWARE on October 10, 2024 and sell it today you would earn a total of  571.00  from holding UPDATE SOFTWARE or generate 59.92% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  UPDATE SOFTWARE

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.

UPDATE SOFTWARE

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UPDATE SOFTWARE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, UPDATE SOFTWARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AM EAGLE and UPDATE SOFTWARE

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

The idea behind AM EAGLE OUTFITTERS and UPDATE SOFTWARE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.