Correlation Between INTERSHOP Communications and American Eagle

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

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

Diversification Opportunities for INTERSHOP Communications and American Eagle

-0.56

Correlation Coefficient

INTERSHOP Communications  American Eagle

Excellent diversification

The 3 months correlation between INTERSHOP and American is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie 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 INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft 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 INTERSHOP Communications i.e., INTERSHOP Communications and American Eagle go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and American Eagle

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to generate 0.56 times more return on investment than American Eagle. However, INTERSHOP Communications Aktiengesellschaft is 1.78 times less risky than American Eagle. It trades about -0.1 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.06 per unit of risk. If you would invest  193.00  in INTERSHOP Communications Aktiengesellschaft on September 19, 2024 and sell it today you would lose (11.00) from holding INTERSHOP Communications Aktiengesellschaft or give up 5.7% of portfolio value over 90 days.

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

INTERSHOP Communications Aktie  vs.  American Eagle Outfitters

INTERSHOP Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, INTERSHOP Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unsteady 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.

Pair Trading with INTERSHOP Communications and American Eagle

The main advantage of trading using opposite INTERSHOP Communications and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.