Correlation Between American Eagle and STRAITS TRADG

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

Diversification Opportunities for American Eagle and STRAITS TRADG

-0.18

Correlation Coefficient

American Eagle  STRAITS TRADG

Good diversification

The 3 months correlation between American and STRAITS is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and STRAITS TRADG SD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAITS TRADG SD 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 STRAITS TRADG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAITS TRADG SD has no effect on the direction of American Eagle i.e., American Eagle and STRAITS TRADG go up and down completely randomly.

Pair Corralation between American Eagle and STRAITS TRADG

Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.66 times more return on investment than STRAITS TRADG. However, American Eagle is 1.66 times more volatile than STRAITS TRADG SD. It trades about 0.02 of its potential returns per unit of risk. STRAITS TRADG SD is currently generating about -0.03 per unit of risk. If you would invest  1,576  in American Eagle Outfitters on October 5, 2024 and sell it today you would earn a total of  84.00  from holding American Eagle Outfitters or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

American Eagle Outfitters  vs.  STRAITS TRADG SD

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.

STRAITS TRADG SD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRAITS TRADG SD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STRAITS TRADG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Eagle and STRAITS TRADG

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

The idea behind American Eagle Outfitters and STRAITS TRADG SD 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.