Correlation Between Cal Maine and American Eagle

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

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

Diversification Opportunities for Cal Maine and American Eagle

-0.76

Correlation Coefficient

Cal Maine  American Eagle

Pay attention - limited upside

The 3 months correlation between Cal and American is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods 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 Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and American Eagle go up and down completely randomly.

Pair Corralation between Cal Maine and American Eagle

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 1.57 times more return on investment than American Eagle. However, Cal Maine is 1.57 times more volatile than American Eagle Outfitters. It trades about 0.25 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 per unit of risk. 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

Cal Maine Foods  vs.  American Eagle Outfitters

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.

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.

Pair Trading with Cal Maine and American Eagle

The main advantage of trading using opposite Cal Maine and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine 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 Cal Maine Foods 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.

Check out your portfolio center.

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.