Correlation Between Tandy Leather and American Eagle
Can any of the company-specific risk be diversified away by investing in both Tandy Leather 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 Tandy Leather and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tandy Leather Factory and American Eagle Outfitters, you can compare the effects of market volatilities on Tandy Leather 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 Tandy Leather with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandy Leather and American Eagle.
Diversification Opportunities for Tandy Leather and American Eagle
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tandy and American is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory 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 Tandy Leather 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 Tandy Leather Factory 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 Tandy Leather i.e., Tandy Leather and American Eagle go up and down completely randomly.
Pair Corralation between Tandy Leather and American Eagle
Considering the 90-day investment horizon Tandy Leather Factory is expected to generate 1.12 times more return on investment than American Eagle. However, Tandy Leather is 1.12 times more volatile than American Eagle Outfitters. It trades about 0.09 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.03 per unit of risk. If you would invest 407.00 in Tandy Leather Factory on September 12, 2024 and sell it today you would earn a total of 68.00 from holding Tandy Leather Factory or generate 16.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Tandy Leather Factory vs. American Eagle Outfitters
Performance |
Timeline |
Tandy Leather Factory |
American Eagle Outfitters |
Tandy Leather and American Eagle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tandy Leather and American Eagle
The main advantage of trading using opposite Tandy Leather and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandy Leather 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.Tandy Leather vs. Green River Gold | Tandy Leather vs. Dixons Carphone plc | Tandy Leather vs. Ceconomy AG ADR | Tandy Leather vs. Winmark |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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