Correlation Between AM EAGLE and Johnson Johnson

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

Diversification Opportunities for AM EAGLE and Johnson Johnson

0.43

Correlation Coefficient

AM EAGLE  Johnson Johnson

Very weak diversification

The 3 months correlation between AFG and Johnson is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of AM EAGLE i.e., AM EAGLE and Johnson Johnson go up and down completely randomly.

Pair Corralation between AM EAGLE and Johnson Johnson

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 3.21 times more return on investment than Johnson Johnson. However, AM EAGLE is 3.21 times more volatile than Johnson Johnson. It trades about -0.02 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.11 per unit of risk. If you would invest  1,738  in AM EAGLE OUTFITTERS on September 17, 2024 and sell it today you would lose (98.00) from holding AM EAGLE OUTFITTERS or give up 5.64% of portfolio value over 90 days.

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

AM EAGLE OUTFITTERS  vs.  Johnson Johnson

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.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking 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 AM EAGLE and Johnson Johnson

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

The idea behind AM EAGLE OUTFITTERS and Johnson Johnson 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.