Correlation Between COLUMBIA SPORTSWEAR and American Eagle

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

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

Diversification Opportunities for COLUMBIA SPORTSWEAR and American Eagle

-0.46

Correlation Coefficient

COLUMBIA SPORTSWEAR  American Eagle

Very good diversification

The 3 months correlation between COLUMBIA and American is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR i.e., COLUMBIA SPORTSWEAR and American Eagle go up and down completely randomly.

Pair Corralation between COLUMBIA SPORTSWEAR and American Eagle

Assuming the 90 days trading horizon COLUMBIA SPORTSWEAR is expected to generate 3.32 times less return on investment than American Eagle. But when comparing it to its historical volatility, COLUMBIA SPORTSWEAR is 2.09 times less risky than American Eagle. It trades about 0.02 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,290  in American Eagle Outfitters on September 14, 2024 and sell it today you would earn a total of  340.00  from holding American Eagle Outfitters or generate 26.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

COLUMBIA SPORTSWEAR  vs.  American Eagle Outfitters

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, COLUMBIA SPORTSWEAR 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 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.

Pair Trading with COLUMBIA SPORTSWEAR and American Eagle

The main advantage of trading using opposite COLUMBIA SPORTSWEAR and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.