Correlation Between American Eagle and Bridgewater Bancshares
Can any of the company-specific risk be diversified away by investing in both American Eagle and Bridgewater Bancshares 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 Bridgewater Bancshares 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 Bridgewater Bancshares, you can compare the effects of market volatilities on American Eagle and Bridgewater Bancshares 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 Bridgewater Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Bridgewater Bancshares.
Diversification Opportunities for American Eagle and Bridgewater Bancshares
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Bridgewater is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Bridgewater Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgewater Bancshares 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 Bridgewater Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgewater Bancshares has no effect on the direction of American Eagle i.e., American Eagle and Bridgewater Bancshares go up and down completely randomly.
Pair Corralation between American Eagle and Bridgewater Bancshares
Considering the 90-day investment horizon American Eagle Outfitters is expected to generate 1.29 times more return on investment than Bridgewater Bancshares. However, American Eagle is 1.29 times more volatile than Bridgewater Bancshares. It trades about 0.04 of its potential returns per unit of risk. Bridgewater Bancshares is currently generating about -0.08 per unit of risk. If you would invest 2,178 in American Eagle Outfitters on January 20, 2024 and sell it today you would earn a total of 56.00 from holding American Eagle Outfitters or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
American Eagle Outfitters vs. Bridgewater Bancshares
Performance |
| Timeline |
| American Eagle Outfitters |
| Bridgewater Bancshares |
American Eagle and Bridgewater Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Bridgewater Bancshares
The main advantage of trading using opposite American Eagle and Bridgewater Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Bridgewater Bancshares 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 Bridgewater Bancshares will offset losses from the drop in Bridgewater Bancshares' long position.| American Eagle vs. Urban Outfitters | American Eagle vs. Gap Inc | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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