Correlation Between American Eagle and Reitmans (Canada)

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

Diversification Opportunities for American Eagle and Reitmans (Canada)

0.54

Correlation Coefficient

American Eagle  Reitmans (Canada)

Very weak diversification

The 3 months correlation between American and Reitmans is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans (Canada) 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 Reitmans (Canada). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans (Canada) has no effect on the direction of American Eagle i.e., American Eagle and Reitmans (Canada) go up and down completely randomly.

Pair Corralation between American Eagle and Reitmans (Canada)

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Reitmans (Canada). In addition to that, American Eagle is 1.48 times more volatile than Reitmans Limited. It trades about -0.18 of its total potential returns per unit of risk. Reitmans Limited is currently generating about -0.02 per unit of volatility. If you would invest  169.00  in Reitmans Limited on December 20, 2024 and sell it today you would lose (6.00) from holding Reitmans Limited or give up 3.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

American Eagle Outfitters  vs.  Reitmans Limited

American Eagle Outfitters

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Reitmans (Canada)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reitmans (Canada) 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 Reitmans (Canada)

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

The idea behind American Eagle Outfitters and Reitmans Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.