Correlation Between American Eagle and UPDATE SOFTWARE

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

Diversification Opportunities for American Eagle and UPDATE SOFTWARE

-0.8

Correlation Coefficient

American Eagle  UPDATE SOFTWARE

Pay attention - limited upside

The 3 months correlation between American and UPDATE is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding American 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 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 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 American Eagle i.e., American Eagle and UPDATE SOFTWARE go up and down completely randomly.

Pair Corralation between American Eagle and UPDATE SOFTWARE

Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.33 times more return on investment than UPDATE SOFTWARE. However, American Eagle is 1.33 times more volatile than UPDATE SOFTWARE. It trades about -0.09 of its potential returns per unit of risk. UPDATE SOFTWARE is currently generating about -0.24 per unit of risk. If you would invest  1,700  in American Eagle Outfitters on October 9, 2024 and sell it today you would lose (50.00) from holding American Eagle Outfitters or give up 2.94% of portfolio value over 90 days.

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

American Eagle Outfitters  vs.  UPDATE SOFTWARE

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 fragile 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.

UPDATE SOFTWARE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UPDATE SOFTWARE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, UPDATE SOFTWARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and UPDATE SOFTWARE

The main advantage of trading using opposite American Eagle and UPDATE SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American 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 American 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.