Correlation Between JJill and American Eagle

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

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

Diversification Opportunities for JJill and American Eagle

-0.54

Correlation Coefficient

JJill  American Eagle

Excellent diversification

The 3 months correlation between JJill and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding JJill Inc 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 JJill 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 JJill Inc 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 JJill i.e., JJill and American Eagle go up and down completely randomly.

Pair Corralation between JJill and American Eagle

Given the investment horizon of 90 days JJill is expected to generate 1.52 times less return on investment than American Eagle. In addition to that, JJill is 1.09 times more volatile than American Eagle Outfitters. It trades about 0.02 of its total potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 per unit of volatility. If you would invest  1,381  in American Eagle Outfitters on September 21, 2024 and sell it today you would earn a total of  255.00  from holding American Eagle Outfitters or generate 18.46% return on investment over 90 days.

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

JJill Inc  vs.  American Eagle Outfitters

JJill Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JJill Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, JJill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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

Pair Trading with JJill and American Eagle

The main advantage of trading using opposite JJill and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JJill 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 JJill Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.