Correlation Between American Eagle and Wayside Technology

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

Diversification Opportunities for American Eagle and Wayside Technology

-0.71

Correlation Coefficient

American Eagle  Wayside Technology

Pay attention - limited upside

The 3 months correlation between American and Wayside is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of American Eagle i.e., American Eagle and Wayside Technology go up and down completely randomly.

Pair Corralation between American Eagle and Wayside Technology

Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Wayside Technology. In addition to that, American Eagle is 1.04 times more volatile than Wayside Technology Group. It trades about -0.25 of its total potential returns per unit of risk. Wayside Technology Group is currently generating about -0.08 per unit of volatility. If you would invest  12,800  in Wayside Technology Group on October 3, 2024 and sell it today you would lose (800.00) from holding Wayside Technology Group or give up 6.25% of portfolio value over 90 days.

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

American Eagle Outfitters  vs.  Wayside Technology Group

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 uncertain performance in the last few months, the Stock's basic 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.

Wayside Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and Wayside Technology

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

The idea behind American Eagle Outfitters and Wayside Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.