Correlation Between American Eagle and ZTO Express

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

Diversification Opportunities for American Eagle and ZTO Express

-0.23

Correlation Coefficient

American Eagle  ZTO Express

Very good diversification

The 3 months correlation between American and ZTO is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and ZTO Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO Express 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 ZTO Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO Express has no effect on the direction of American Eagle i.e., American Eagle and ZTO Express go up and down completely randomly.

Pair Corralation between American Eagle and ZTO Express

Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the ZTO Express. In addition to that, American Eagle is 1.15 times more volatile than ZTO Express. It trades about -0.23 of its total potential returns per unit of risk. ZTO Express is currently generating about -0.02 per unit of volatility. If you would invest  1,870  in ZTO Express on December 22, 2024 and sell it today you would lose (80.00) from holding ZTO Express or give up 4.28% of portfolio value over 90 days.

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

American Eagle Outfitters  vs.  ZTO Express

American Eagle Outfitters

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ZTO Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ZTO Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Eagle and ZTO Express

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

The idea behind American Eagle Outfitters and ZTO Express 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..