Correlation Between American Eagle and Jeffs Brands

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

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

Diversification Opportunities for American Eagle and Jeffs Brands

-0.58

Correlation Coefficient

American Eagle  Jeffs Brands

Excellent diversification

The 3 months correlation between American and Jeffs is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Jeffs Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeffs Brands and American Eagle 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 American Eagle Outfitters are associated (or correlated) with Jeffs Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeffs Brands has no effect on the direction of American Eagle i.e., American Eagle and Jeffs Brands go up and down completely randomly.

Pair Corralation between American Eagle and Jeffs Brands

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Jeffs Brands. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 54.26 times less risky than Jeffs Brands. The stock trades about -0.06 of its potential returns per unit of risk. The Jeffs Brands is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Jeffs Brands on August 30, 2024 and sell it today you would earn a total of  228.00  from holding Jeffs Brands or generate 1085.71% return on investment over 90 days.

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

American Eagle Outfitters  vs.  Jeffs Brands

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 unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Jeffs Brands

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jeffs Brands are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Jeffs Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and Jeffs Brands

The main advantage of trading using opposite American Eagle and Jeffs Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Jeffs Brands 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 Jeffs Brands will offset losses from the drop in Jeffs Brands' long position.

The idea behind American Eagle Outfitters and Jeffs Brands 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.