Correlation Between American Eagle and PVH Corp

Can any of the company-specific risk be diversified away by investing in both American Eagle and PVH Corp 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 PVH Corp 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 PVH Corp, you can compare the effects of market volatilities on American Eagle and PVH Corp 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 PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and PVH Corp.

Diversification Opportunities for American Eagle and PVH Corp

-0.43

Correlation Coefficient

American Eagle  PVH Corp

Very good diversification

The 3 months correlation between American and PVH is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of American Eagle i.e., American Eagle and PVH Corp go up and down completely randomly.

Pair Corralation between American Eagle and PVH Corp

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the PVH Corp. In addition to that, American Eagle is 1.96 times more volatile than PVH Corp. It trades about -0.03 of its total potential returns per unit of risk. PVH Corp is currently generating about 0.08 per unit of volatility. If you would invest  10,382  in PVH Corp on September 15, 2024 and sell it today you would earn a total of  335.00  from holding PVH Corp or generate 3.23% 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.  PVH Corp

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 inconsistent 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.

PVH Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, PVH Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Eagle and PVH Corp

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

The idea behind American Eagle Outfitters and PVH Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.