Correlation Between American Eagle and Silo Pharma

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

Diversification Opportunities for American Eagle and Silo Pharma

0.4

Correlation Coefficient

American Eagle  Silo Pharma

Very weak diversification

The 3 months correlation between American and Silo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Silo Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silo Pharma 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 Silo Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silo Pharma has no effect on the direction of American Eagle i.e., American Eagle and Silo Pharma go up and down completely randomly.

Pair Corralation between American Eagle and Silo Pharma

Considering the 90-day investment horizon American Eagle Outfitters is expected to generate 0.69 times more return on investment than Silo Pharma. However, American Eagle Outfitters is 1.45 times less risky than Silo Pharma. It trades about -0.04 of its potential returns per unit of risk. Silo Pharma is currently generating about -0.09 per unit of risk. If you would invest  1,727  in American Eagle Outfitters on September 21, 2024 and sell it today you would lose (91.00) from holding American Eagle Outfitters or give up 5.27% of portfolio value over 90 days.

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

American Eagle Outfitters  vs.  Silo Pharma

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Silo Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Eagle and Silo Pharma

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

The idea behind American Eagle Outfitters and Silo Pharma 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.