Correlation Between American Eagle and PICKN PAY

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

Diversification Opportunities for American Eagle and PICKN PAY

-0.43

Correlation Coefficient

American Eagle  PICKN PAY

Very good diversification

The 3 months correlation between American and PICKN is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and PICKN PAY STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PICKN PAY STORES 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 PICKN PAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PICKN PAY STORES has no effect on the direction of American Eagle i.e., American Eagle and PICKN PAY go up and down completely randomly.

Pair Corralation between American Eagle and PICKN PAY

Assuming the 90 days horizon American Eagle Outfitters is expected to generate 0.84 times more return on investment than PICKN PAY. However, American Eagle Outfitters is 1.19 times less risky than PICKN PAY. It trades about 0.03 of its potential returns per unit of risk. PICKN PAY STORES is currently generating about -0.03 per unit of risk. If you would invest  1,277  in American Eagle Outfitters on October 11, 2024 and sell it today you would earn a total of  333.00  from holding American Eagle Outfitters or generate 26.08% 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.  PICKN PAY STORES

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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PICKN PAY STORES

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PICKN PAY STORES are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, PICKN PAY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with American Eagle and PICKN PAY

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

The idea behind American Eagle Outfitters and PICKN PAY STORES 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.