Correlation Between American Eagle and GOLD ROAD

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

Diversification Opportunities for American Eagle and GOLD ROAD

-0.47

Correlation Coefficient

American Eagle  GOLD ROAD

Very good diversification

The 3 months correlation between American and GOLD is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of American Eagle i.e., American Eagle and GOLD ROAD go up and down completely randomly.

Pair Corralation between American Eagle and GOLD ROAD

Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.01 times more return on investment than GOLD ROAD. However, American Eagle is 1.01 times more volatile than GOLD ROAD RES. It trades about 0.03 of its potential returns per unit of risk. GOLD ROAD RES is currently generating about 0.03 per unit of risk. If you would invest  1,215  in American Eagle Outfitters on September 23, 2024 and sell it today you would earn a total of  355.00  from holding American Eagle Outfitters or generate 29.22% 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.  GOLD ROAD RES

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

GOLD ROAD RES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and GOLD ROAD

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

The idea behind American Eagle Outfitters and GOLD ROAD RES 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.