Correlation Between AM EAGLE and Universal Display

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

Diversification Opportunities for AM EAGLE and Universal Display

0.6

Correlation Coefficient

AM EAGLE  Universal Display

Poor diversification

The 3 months correlation between AFG and Universal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of AM EAGLE i.e., AM EAGLE and Universal Display go up and down completely randomly.

Pair Corralation between AM EAGLE and Universal Display

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 1.23 times more return on investment than Universal Display. However, AM EAGLE is 1.23 times more volatile than Universal Display. It trades about 0.01 of its potential returns per unit of risk. Universal Display is currently generating about -0.12 per unit of risk. If you would invest  1,718  in AM EAGLE OUTFITTERS on September 12, 2024 and sell it today you would lose (18.00) from holding AM EAGLE OUTFITTERS or give up 1.05% of portfolio value over 90 days.

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

AM EAGLE OUTFITTERS  vs.  Universal Display

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.

Universal Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AM EAGLE and Universal Display

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

The idea behind AM EAGLE OUTFITTERS and Universal Display 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.