Correlation Between American Eagle and US GoldMining

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

Diversification Opportunities for American Eagle and US GoldMining

-0.08

Correlation Coefficient

American Eagle  US GoldMining

Good diversification

The 3 months correlation between American and USGO is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and US GoldMining Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US GoldMining Common 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 US GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US GoldMining Common has no effect on the direction of American Eagle i.e., American Eagle and US GoldMining go up and down completely randomly.

Pair Corralation between American Eagle and US GoldMining

Considering the 90-day investment horizon American Eagle is expected to generate 2.63 times less return on investment than US GoldMining. But when comparing it to its historical volatility, American Eagle Outfitters is 2.12 times less risky than US GoldMining. It trades about 0.02 of its potential returns per unit of risk. US GoldMining Common is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  566.00  in US GoldMining Common on February 1, 2024 and sell it today you would earn a total of  5.00  from holding US GoldMining Common or generate 0.88% return on investment over 90 days.

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

American Eagle Outfitters  vs.  US GoldMining Common

American Eagle Outfitters

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Eagle Outfitters are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, American Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

US GoldMining Common

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days US GoldMining Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, US GoldMining is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Eagle and US GoldMining

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

The idea behind American Eagle Outfitters and US GoldMining Common 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..