Correlation Between American Eagle and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both American Eagle and Edwards Lifesciences 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 Edwards Lifesciences 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 Edwards Lifesciences Corp, you can compare the effects of market volatilities on American Eagle and Edwards Lifesciences 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 Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Edwards Lifesciences.
Diversification Opportunities for American Eagle and Edwards Lifesciences
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Edwards is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp 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 Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of American Eagle i.e., American Eagle and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between American Eagle and Edwards Lifesciences
Considering the 90-day investment horizon American Eagle Outfitters is expected to generate 1.4 times more return on investment than Edwards Lifesciences. However, American Eagle is 1.4 times more volatile than Edwards Lifesciences Corp. It trades about 0.12 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.02 per unit of risk. If you would invest 1,176 in American Eagle Outfitters on January 19, 2024 and sell it today you would earn a total of 1,058 from holding American Eagle Outfitters or generate 89.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Edwards Lifesciences Corp
Performance |
| Timeline |
| American Eagle Outfitters |
| Edwards Lifesciences Corp |
American Eagle and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Edwards Lifesciences
The main advantage of trading using opposite American Eagle and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Edwards Lifesciences 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 Edwards Lifesciences will offset losses from the drop in Edwards Lifesciences' long position.| American Eagle vs. Urban Outfitters | American Eagle vs. Gap Inc | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place |
| Edwards Lifesciences vs. Medtronic PLC | Edwards Lifesciences vs. Abbott Laboratories | Edwards Lifesciences vs. Boston Scientific Corp | Edwards Lifesciences vs. Zimmer Biomet Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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