Correlation Between 1StdibsCom and American Eagle

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Can any of the company-specific risk be diversified away by investing in both 1StdibsCom 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 1StdibsCom and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1StdibsCom and American Eagle Outfitters, you can compare the effects of market volatilities on 1StdibsCom 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 1StdibsCom with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1StdibsCom and American Eagle.

Diversification Opportunities for 1StdibsCom and American Eagle

1StdibsComAmericanDiversified Away1StdibsComAmericanDiversified Away100%
0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between 1StdibsCom and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding 1StdibsCom 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 1StdibsCom 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 1StdibsCom 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 1StdibsCom i.e., 1StdibsCom and American Eagle go up and down completely randomly.

Pair Corralation between 1StdibsCom and American Eagle

Given the investment horizon of 90 days 1StdibsCom is expected to under-perform the American Eagle. But the stock apears to be less risky and, when comparing its historical volatility, 1StdibsCom is 1.08 times less risky than American Eagle. The stock trades about -0.15 of its potential returns per unit of risk. The American Eagle Outfitters is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,090  in American Eagle Outfitters on October 15, 2024 and sell it today you would lose (467.00) from holding American Eagle Outfitters or give up 22.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

1StdibsCom  vs.  American Eagle Outfitters

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -25-20-15-10-50
JavaScript chart by amCharts 3.21.15DIBS AEO
       Timeline  
1StdibsCom 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days 1StdibsCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan3.43.63.844.24.44.64.8
American Eagle Outfitters 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan161718192021

1StdibsCom and American Eagle Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.17-3.13-2.08-1.03-0.01520.881.792.713.624.53 0.0450.0500.0550.0600.065
JavaScript chart by amCharts 3.21.15DIBS AEO
       Returns  

Pair Trading with 1StdibsCom and American Eagle

The main advantage of trading using opposite 1StdibsCom and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1StdibsCom 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 1StdibsCom 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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