Correlation Between PT Steel and AM EAGLE

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

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

Diversification Opportunities for PT Steel and AM EAGLE

0.77

Correlation Coefficient

PT Steel  AM EAGLE

Poor diversification

The 3 months correlation between S08 and AFG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe 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 PT Steel 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 PT Steel Pipe 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 PT Steel i.e., PT Steel and AM EAGLE go up and down completely randomly.

Pair Corralation between PT Steel and AM EAGLE

Assuming the 90 days horizon PT Steel Pipe is expected to generate 2.77 times more return on investment than AM EAGLE. However, PT Steel is 2.77 times more volatile than AM EAGLE OUTFITTERS. It trades about 0.03 of its potential returns per unit of risk. AM EAGLE OUTFITTERS is currently generating about -0.01 per unit of risk. If you would invest  1.50  in PT Steel Pipe on October 9, 2024 and sell it today you would lose (0.05) from holding PT Steel Pipe or give up 3.33% of portfolio value over 90 days.

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

PT Steel Pipe  vs.  AM EAGLE OUTFITTERS

PT Steel Pipe

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Steel Pipe are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Steel reported solid returns over the last few months and may actually be approaching a breakup point.

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental 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 PT Steel and AM EAGLE

The main advantage of trading using opposite PT Steel and AM EAGLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel 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 PT Steel Pipe 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..