Correlation Between American Eagle and Cal Maine

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

Diversification Opportunities for American Eagle and Cal Maine

-0.76

Correlation Coefficient

American Eagle  Cal Maine

Pay attention - limited upside

The 3 months correlation between American and Cal is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of American Eagle i.e., American Eagle and Cal Maine go up and down completely randomly.

Pair Corralation between American Eagle and Cal Maine

Assuming the 90 days trading horizon American Eagle is expected to generate 14.79 times less return on investment than Cal Maine. But when comparing it to its historical volatility, American Eagle Outfitters is 1.57 times less risky than Cal Maine. It trades about 0.03 of its potential returns per unit of risk. Cal Maine Foods is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,130  in Cal Maine Foods on October 7, 2024 and sell it today you would earn a total of  1,250  from holding Cal Maine Foods or generate 13.69% return on investment over 90 days.

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

American Eagle Outfitters  vs.  Cal Maine Foods

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cal Maine Foods

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cal Maine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and Cal Maine

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

The idea behind American Eagle Outfitters and Cal Maine Foods 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.