Correlation Between Target and AM EAGLE

Can any of the company-specific risk be diversified away by investing in both Target and AM EAGLE 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 Target and AM EAGLE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Target and AM EAGLE OUTFITTERS, you can compare the effects of market volatilities on Target and AM EAGLE 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 Target with a short position of AM EAGLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and AM EAGLE.

Diversification Opportunities for Target and AM EAGLE

0.29

Correlation Coefficient

Target  AM EAGLE

Modest diversification

The 3 months correlation between Target and AFG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Target and AM EAGLE OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AM EAGLE OUTFITTERS and Target 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 Target are associated (or correlated) with AM EAGLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AM EAGLE OUTFITTERS has no effect on the direction of Target i.e., Target and AM EAGLE go up and down completely randomly.

Pair Corralation between Target and AM EAGLE

Assuming the 90 days horizon Target is expected to under-perform the AM EAGLE. In addition to that, Target is 1.7 times more volatile than AM EAGLE OUTFITTERS. It trades about -0.06 of its total potential returns per unit of risk. AM EAGLE OUTFITTERS is currently generating about 0.14 per unit of volatility. If you would invest  1,760  in AM EAGLE OUTFITTERS on September 5, 2024 and sell it today you would earn a total of  160.00  from holding AM EAGLE OUTFITTERS or generate 9.09% return on investment over 90 days.

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

Target  vs.  AM EAGLE OUTFITTERS

Target

Risk-Adjusted Performance

0 of 100

Very Weak

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

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AM EAGLE OUTFITTERS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, AM EAGLE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Target and AM EAGLE

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

The idea behind Target and AM EAGLE OUTFITTERS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.