Correlation Between American Eagle and MOLSON RS

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

Diversification Opportunities for American Eagle and MOLSON RS

0.03

Correlation Coefficient

American Eagle  MOLSON RS

Significant diversification

The 3 months correlation between American and MOLSON is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and MOLSON RS BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOLSON RS BEVERAGE 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 MOLSON RS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOLSON RS BEVERAGE has no effect on the direction of American Eagle i.e., American Eagle and MOLSON RS go up and down completely randomly.

Pair Corralation between American Eagle and MOLSON RS

Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 1.0 times more return on investment than MOLSON RS. However, American Eagle is 1.0 times more volatile than MOLSON RS BEVERAGE. It trades about 0.06 of its potential returns per unit of risk. MOLSON RS BEVERAGE is currently generating about 0.02 per unit of risk. If you would invest  1,229  in American Eagle Outfitters on February 15, 2024 and sell it today you would earn a total of  1,051  from holding American Eagle Outfitters or generate 85.52% return on investment over 90 days.

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

American Eagle Outfitters  vs.  MOLSON RS BEVERAGE

American Eagle Outfitters

Risk-Adjusted Performance

6 of 100

Modest

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

MOLSON RS BEVERAGE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MOLSON RS BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MOLSON RS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Eagle and MOLSON RS

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

The idea behind American Eagle Outfitters and MOLSON RS BEVERAGE 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.