Correlation Between Evolution Gaming and American Eagle

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

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

Diversification Opportunities for Evolution Gaming and American Eagle

0.44

Correlation Coefficient

Evolution Gaming  American Eagle

Very weak diversification

The 3 months correlation between Evolution and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and Evolution Gaming 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 Evolution Gaming Group are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Evolution Gaming i.e., Evolution Gaming and American Eagle go up and down completely randomly.

Pair Corralation between Evolution Gaming and American Eagle

Assuming the 90 days horizon Evolution Gaming Group is expected to generate 0.3 times more return on investment than American Eagle. However, Evolution Gaming Group is 3.33 times less risky than American Eagle. It trades about -0.03 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.01 per unit of risk. If you would invest  9,018  in Evolution Gaming Group on September 12, 2024 and sell it today you would lose (78.00) from holding Evolution Gaming Group or give up 0.86% of portfolio value over 90 days.

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

Evolution Gaming Group  vs.  American Eagle Outfitters

Evolution Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Gaming Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 very healthy technical and fundamental indicators, American Eagle is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Evolution Gaming and American Eagle

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

The idea behind Evolution Gaming Group and American Eagle Outfitters 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.