Correlation Between American Eagle and Hour Loop

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

Diversification Opportunities for American Eagle and Hour Loop

-0.52

Correlation Coefficient

American Eagle  Hour Loop

Excellent diversification

The 3 months correlation between American and Hour is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Hour Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hour Loop 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 Hour Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hour Loop has no effect on the direction of American Eagle i.e., American Eagle and Hour Loop go up and down completely randomly.

Pair Corralation between American Eagle and Hour Loop

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Hour Loop. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 7.47 times less risky than Hour Loop. The stock trades about -0.06 of its potential returns per unit of risk. The Hour Loop is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Hour Loop on October 22, 2024 and sell it today you would earn a total of  122.00  from holding Hour Loop or generate 125.77% return on investment over 90 days.

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

American Eagle Outfitters  vs.  Hour Loop

American Eagle Outfitters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Eagle Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hour Loop

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and Hour Loop

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

The idea behind American Eagle Outfitters and Hour Loop 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.