Correlation Between American Eagle and STORE

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

Diversification Opportunities for American Eagle and STORE

0.37

Correlation Coefficient

American Eagle  STORE

Weak diversification

The 3 months correlation between American and STORE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and STORE CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE CAP P 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 STORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE CAP P has no effect on the direction of American Eagle i.e., American Eagle and STORE go up and down completely randomly.

Pair Corralation between American Eagle and STORE

Considering the 90-day investment horizon American Eagle Outfitters is expected to generate 2.19 times more return on investment than STORE. However, American Eagle is 2.19 times more volatile than STORE CAP P. It trades about 0.03 of its potential returns per unit of risk. STORE CAP P is currently generating about -0.01 per unit of risk. If you would invest  1,347  in American Eagle Outfitters on September 15, 2024 and sell it today you would earn a total of  388.00  from holding American Eagle Outfitters or generate 28.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

American Eagle Outfitters  vs.  STORE CAP P

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.

STORE CAP P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STORE CAP P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for STORE CAP P investors.

Pair Trading with American Eagle and STORE

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

The idea behind American Eagle Outfitters and STORE CAP P 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..