Correlation Between American Eagle and Apollo Medical

Can any of the company-specific risk be diversified away by investing in both American Eagle and Apollo Medical 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 American Eagle and Apollo Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Eagle Outfitters and Apollo Medical Holdings, you can compare the effects of market volatilities on American Eagle and Apollo Medical 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 American Eagle with a short position of Apollo Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Apollo Medical.

Diversification Opportunities for American Eagle and Apollo Medical

-0.45

Correlation Coefficient

American Eagle  Apollo Medical

Very good diversification

The 3 months correlation between American and Apollo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Apollo Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Medical Holdings and American 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 American Eagle Outfitters are associated (or correlated) with Apollo Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Medical Holdings has no effect on the direction of American Eagle i.e., American Eagle and Apollo Medical go up and down completely randomly.

Pair Corralation between American Eagle and Apollo Medical

Assuming the 90 days trading horizon American Eagle is expected to generate 7.44 times less return on investment than Apollo Medical. In addition to that, American Eagle is 1.59 times more volatile than Apollo Medical Holdings. It trades about 0.01 of its total potential returns per unit of risk. Apollo Medical Holdings is currently generating about 0.13 per unit of volatility. If you would invest  3,580  in Apollo Medical Holdings on September 3, 2024 and sell it today you would earn a total of  420.00  from holding Apollo Medical Holdings or generate 11.73% return on investment over 90 days.

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

American Eagle Outfitters  vs.  Apollo Medical Holdings

American Eagle Outfitters

Risk-Adjusted Performance

0 of 100

Very Weak

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

Apollo Medical Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Medical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Apollo Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Eagle and Apollo Medical

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

The idea behind American Eagle Outfitters and Apollo Medical Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.