Correlation Between American Eagle and Hemisphere Energy

Can any of the company-specific risk be diversified away by investing in both American Eagle and Hemisphere Energy 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 Hemisphere Energy 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 Hemisphere Energy Corp, you can compare the effects of market volatilities on American Eagle and Hemisphere Energy 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 Hemisphere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Hemisphere Energy.

Diversification Opportunities for American Eagle and Hemisphere Energy

0.11

Correlation Coefficient

American Eagle  Hemisphere Energy

Average diversification

The 3 months correlation between American and Hemisphere is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Hemisphere Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy Corp 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 Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy Corp has no effect on the direction of American Eagle i.e., American Eagle and Hemisphere Energy go up and down completely randomly.

Pair Corralation between American Eagle and Hemisphere Energy

Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Hemisphere Energy. In addition to that, American Eagle is 2.98 times more volatile than Hemisphere Energy Corp. It trades about -0.01 of its total potential returns per unit of risk. Hemisphere Energy Corp is currently generating about 0.06 per unit of volatility. If you would invest  119.00  in Hemisphere Energy Corp on September 21, 2024 and sell it today you would earn a total of  2.00  from holding Hemisphere Energy Corp or generate 1.68% return on investment over 90 days.

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

American Eagle Outfitters  vs.  Hemisphere Energy Corp

American Eagle Outfitters

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hemisphere Energy Corp

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with American Eagle and Hemisphere Energy

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

The idea behind American Eagle Outfitters and Hemisphere Energy Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.