Correlation Between AM EAGLE and INTERCONT HOTELS

Can any of the company-specific risk be diversified away by investing in both AM EAGLE and INTERCONT HOTELS 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 INTERCONT HOTELS 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 INTERCONT HOTELS, you can compare the effects of market volatilities on AM EAGLE and INTERCONT HOTELS 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 INTERCONT HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and INTERCONT HOTELS.

Diversification Opportunities for AM EAGLE and INTERCONT HOTELS

-0.33

Correlation Coefficient

AM EAGLE  INTERCONT HOTELS

Very good diversification

The 3 months correlation between AFG and INTERCONT is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS 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 INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of AM EAGLE i.e., AM EAGLE and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between AM EAGLE and INTERCONT HOTELS

Assuming the 90 days trading horizon AM EAGLE is expected to generate 19.87 times less return on investment than INTERCONT HOTELS. In addition to that, AM EAGLE is 1.53 times more volatile than INTERCONT HOTELS. It trades about 0.01 of its total potential returns per unit of risk. INTERCONT HOTELS is currently generating about 0.27 per unit of volatility. If you would invest  9,050  in INTERCONT HOTELS on September 12, 2024 and sell it today you would earn a total of  3,350  from holding INTERCONT HOTELS or generate 37.02% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  INTERCONT HOTELS

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 comparatively stable technical and fundamental indicators, AM EAGLE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

INTERCONT HOTELS

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INTERCONT HOTELS are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, INTERCONT HOTELS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AM EAGLE and INTERCONT HOTELS

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

The idea behind AM EAGLE OUTFITTERS and INTERCONT HOTELS 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.