Correlation Between OReilly Automotive and American Eagle

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

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

Diversification Opportunities for OReilly Automotive and American Eagle

-0.76

Correlation Coefficient

OReilly Automotive  American Eagle

Pay attention - limited upside

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

Pair Corralation between OReilly Automotive and American Eagle

Given the investment horizon of 90 days OReilly Automotive is expected to generate 0.41 times more return on investment than American Eagle. However, OReilly Automotive is 2.41 times less risky than American Eagle. It trades about 0.24 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.18 per unit of risk. If you would invest  117,992  in OReilly Automotive on December 29, 2024 and sell it today you would earn a total of  22,863  from holding OReilly Automotive or generate 19.38% return on investment over 90 days.

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

OReilly Automotive  vs.  American Eagle Outfitters

OReilly Automotive

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, OReilly Automotive showed solid returns over the last few months and may actually be approaching a breakup point.

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 OReilly Automotive and American Eagle

The main advantage of trading using opposite OReilly Automotive and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OReilly Automotive 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 OReilly Automotive 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.