Correlation Between American Eagle and United Natural

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

Diversification Opportunities for American Eagle and United Natural

-0.7

Correlation Coefficient

American Eagle  United Natural

Excellent diversification

The 3 months correlation between American and United is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of American Eagle i.e., American Eagle and United Natural go up and down completely randomly.

Pair Corralation between American Eagle and United Natural

Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 0.73 times more return on investment than United Natural. However, American Eagle Outfitters is 1.36 times less risky than United Natural. It trades about 0.02 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.01 per unit of risk. If you would invest  1,346  in American Eagle Outfitters on October 22, 2024 and sell it today you would earn a total of  194.00  from holding American Eagle Outfitters or generate 14.41% 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.  United Natural 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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

United Natural Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and United Natural

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

The idea behind American Eagle Outfitters and United Natural 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.