Correlation Between American Eagle and G-III Apparel

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

Diversification Opportunities for American Eagle and G-III Apparel

-0.08

Correlation Coefficient

American Eagle  G-III Apparel

Good diversification

The 3 months correlation between American and G-III is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and G III Apparel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III Apparel 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 G-III Apparel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III Apparel has no effect on the direction of American Eagle i.e., American Eagle and G-III Apparel go up and down completely randomly.

Pair Corralation between American Eagle and G-III Apparel

Assuming the 90 days trading horizon American Eagle is expected to generate 1.95 times less return on investment than G-III Apparel. But when comparing it to its historical volatility, American Eagle Outfitters is 1.1 times less risky than G-III Apparel. It trades about 0.03 of its potential returns per unit of risk. G III Apparel Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,380  in G III Apparel Group on August 31, 2024 and sell it today you would earn a total of  1,420  from holding G III Apparel Group or generate 102.9% return on investment over 90 days.

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

American Eagle Outfitters  vs.  G III Apparel Group

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 comparatively stable basic indicators, American Eagle is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

G III Apparel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, G-III Apparel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and G-III Apparel

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

The idea behind American Eagle Outfitters and G III Apparel Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.