Correlation Between AM EAGLE and BP Plc

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

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

Diversification Opportunities for AM EAGLE and BP Plc

0.26

Correlation Coefficient

AM EAGLE  BP Plc

Modest diversification

The 3 months correlation between AFG and BSU is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and AM EAGLE 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 AM EAGLE OUTFITTERS are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of AM EAGLE i.e., AM EAGLE and BP Plc go up and down completely randomly.

Pair Corralation between AM EAGLE and BP Plc

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the BP Plc. In addition to that, AM EAGLE is 1.76 times more volatile than BP plc. It trades about -0.04 of its total potential returns per unit of risk. BP plc is currently generating about -0.05 per unit of volatility. If you would invest  2,909  in BP plc on September 19, 2024 and sell it today you would lose (169.00) from holding BP plc or give up 5.81% of portfolio value over 90 days.

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

AM EAGLE OUTFITTERS  vs.  BP plc

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.

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BP Plc is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AM EAGLE and BP Plc

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

The idea behind AM EAGLE OUTFITTERS and BP plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.