Correlation Between Tri Pointe and AM EAGLE

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

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

Diversification Opportunities for Tri Pointe and AM EAGLE

0.35

Correlation Coefficient

Tri Pointe  AM EAGLE

Weak diversification

The 3 months correlation between Tri and AFG is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes 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 Tri Pointe 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 Tri Pointe Homes 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 Tri Pointe i.e., Tri Pointe and AM EAGLE go up and down completely randomly.

Pair Corralation between Tri Pointe and AM EAGLE

Assuming the 90 days horizon Tri Pointe is expected to generate 1.24 times less return on investment than AM EAGLE. But when comparing it to its historical volatility, Tri Pointe Homes is 1.29 times less risky than AM EAGLE. It trades about 0.06 of its potential returns per unit of risk. AM EAGLE OUTFITTERS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,778  in AM EAGLE OUTFITTERS on September 4, 2024 and sell it today you would earn a total of  142.00  from holding AM EAGLE OUTFITTERS or generate 7.99% return on investment over 90 days.

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

Tri Pointe Homes  vs.  AM EAGLE OUTFITTERS

Tri Pointe Homes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Pointe Homes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tri Pointe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AM EAGLE OUTFITTERS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady 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 Tri Pointe and AM EAGLE

The main advantage of trading using opposite Tri Pointe and AM EAGLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Pointe 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 Tri Pointe Homes 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.