Correlation Between American Eagle and INSURANCE AUST

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

Diversification Opportunities for American Eagle and INSURANCE AUST

-0.53

Correlation Coefficient

American Eagle  INSURANCE AUST

Excellent diversification

The 3 months correlation between American and INSURANCE is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of American Eagle i.e., American Eagle and INSURANCE AUST go up and down completely randomly.

Pair Corralation between American Eagle and INSURANCE AUST

Assuming the 90 days trading horizon American Eagle is expected to generate 1.68 times less return on investment than INSURANCE AUST. In addition to that, American Eagle is 1.55 times more volatile than INSURANCE AUST GRP. It trades about 0.05 of its total potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.12 per unit of volatility. If you would invest  460.00  in INSURANCE AUST GRP on September 4, 2024 and sell it today you would earn a total of  55.00  from holding INSURANCE AUST GRP or generate 11.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

American Eagle Outfitters  vs.  INSURANCE AUST GRP

American Eagle Outfitters

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Eagle Outfitters are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, American Eagle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INSURANCE AUST GRP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Eagle and INSURANCE AUST

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

The idea behind American Eagle Outfitters and INSURANCE AUST GRP 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.