Correlation Between American Eagle and Vulcan Energy

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

Diversification Opportunities for American Eagle and Vulcan Energy

-0.5

Correlation Coefficient

American Eagle  Vulcan Energy

Very good diversification

The 3 months correlation between American and Vulcan is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy Resources 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of American Eagle i.e., American Eagle and Vulcan Energy go up and down completely randomly.

Pair Corralation between American Eagle and Vulcan Energy

Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the Vulcan Energy. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.83 times less risky than Vulcan Energy. The stock trades about -0.1 of its potential returns per unit of risk. The Vulcan Energy Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  284.00  in Vulcan Energy Resources on September 28, 2024 and sell it today you would earn a total of  53.00  from holding Vulcan Energy Resources or generate 18.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

American Eagle Outfitters  vs.  Vulcan Energy Resources

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 fragile performance in the last few months, the Stock's basic 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.

Vulcan Energy Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Vulcan Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and Vulcan Energy

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

The idea behind American Eagle Outfitters and Vulcan Energy Resources 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.