Correlation Between Aritzia and American Eagle

Can any of the company-specific risk be diversified away by investing in both Aritzia and American Eagle 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 Aritzia and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aritzia and American Eagle Outfitters, you can compare the effects of market volatilities on Aritzia and American Eagle 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 Aritzia with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aritzia and American Eagle.

Diversification Opportunities for Aritzia and American Eagle

0.21

Correlation Coefficient

Aritzia  American Eagle

Modest diversification

The 3 months correlation between Aritzia and American is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aritzia and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and Aritzia 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 Aritzia are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Aritzia i.e., Aritzia and American Eagle go up and down completely randomly.

Pair Corralation between Aritzia and American Eagle

Assuming the 90 days horizon Aritzia is expected to generate 1.2 times more return on investment than American Eagle. However, Aritzia is 1.2 times more volatile than American Eagle Outfitters. It trades about 0.03 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.16 per unit of risk. If you would invest  3,700  in Aritzia on December 26, 2024 and sell it today you would earn a total of  108.00  from holding Aritzia or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Aritzia  vs.  American Eagle Outfitters

Aritzia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aritzia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aritzia and American Eagle

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

The idea behind Aritzia and American Eagle Outfitters 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.