Correlation Between FORWARD AIR and American Eagle

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

By analyzing existing cross correlation between FORWARD AIR P and American Eagle Outfitters, you can compare the effects of market volatilities on FORWARD AIR and American 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 FORWARD AIR with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORWARD AIR and American Eagle.

Diversification Opportunities for FORWARD AIR and American Eagle

0.14

Correlation Coefficient

FORWARD AIR  American Eagle

Average diversification

The 3 months correlation between FORWARD and American is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and FORWARD AIR 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 FORWARD AIR P are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and American Eagle go up and down completely randomly.

Pair Corralation between FORWARD AIR and American Eagle

Assuming the 90 days horizon FORWARD AIR P is expected to under-perform the American Eagle. In addition to that, FORWARD AIR is 1.52 times more volatile than American Eagle Outfitters. It trades about -0.03 of its total potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 per unit of volatility. If you would invest  1,249  in American Eagle Outfitters on September 19, 2024 and sell it today you would earn a total of  381.00  from holding American Eagle Outfitters or generate 30.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

FORWARD AIR P  vs.  American Eagle Outfitters

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 comparatively stable basic indicators, American Eagle is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FORWARD AIR and American Eagle

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

The idea behind FORWARD AIR P and American 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.