Correlation Between Retail Estates and American Eagle
Can any of the company-specific risk be diversified away by investing in both Retail Estates 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 Retail Estates and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Estates NV and American Eagle Outfitters, you can compare the effects of market volatilities on Retail Estates 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 Retail Estates with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and American Eagle.
Diversification Opportunities for Retail Estates and American Eagle
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Retail and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV 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 Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and American Eagle go up and down completely randomly.
Pair Corralation between Retail Estates and American Eagle
Assuming the 90 days horizon Retail Estates NV is expected to generate 0.38 times more return on investment than American Eagle. However, Retail Estates NV is 2.62 times less risky than American Eagle. It trades about 0.02 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.18 per unit of risk. If you would invest 5,900 in Retail Estates NV on December 30, 2024 and sell it today you would earn a total of 80.00 from holding Retail Estates NV or generate 1.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Retail Estates NV vs. American Eagle Outfitters
Performance |
Timeline |
Retail Estates NV |
American Eagle Outfitters |
Retail Estates and American Eagle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Retail Estates and American Eagle
The main advantage of trading using opposite Retail Estates and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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.Retail Estates vs. MAG SILVER | Retail Estates vs. WESANA HEALTH HOLD | Retail Estates vs. UNITED RENTALS | Retail Estates vs. National Health Investors |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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