Correlation Between AM EAGLE and WILLIS LEASE

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

Diversification Opportunities for AM EAGLE and WILLIS LEASE

-0.55

Correlation Coefficient

AM EAGLE  WILLIS LEASE

Excellent diversification

The 3 months correlation between AFG and WILLIS is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of AM EAGLE i.e., AM EAGLE and WILLIS LEASE go up and down completely randomly.

Pair Corralation between AM EAGLE and WILLIS LEASE

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the WILLIS LEASE. But the stock apears to be less risky and, when comparing its historical volatility, AM EAGLE OUTFITTERS is 1.68 times less risky than WILLIS LEASE. The stock trades about -0.1 of its potential returns per unit of risk. The WILLIS LEASE FIN is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  12,385  in WILLIS LEASE FIN on September 27, 2024 and sell it today you would earn a total of  6,915  from holding WILLIS LEASE FIN or generate 55.83% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  WILLIS LEASE FIN

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

WILLIS LEASE FIN

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AM EAGLE and WILLIS LEASE

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

The idea behind AM EAGLE OUTFITTERS and WILLIS LEASE FIN 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.