Correlation Between Hibbett Sports and American Eagle

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

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

Diversification Opportunities for Hibbett Sports and American Eagle

-0.3

Correlation Coefficient

Hibbett Sports  American Eagle

Very good diversification

The 3 months correlation between Hibbett and American is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hibbett Sports 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 Hibbett Sports 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 Hibbett Sports 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 Hibbett Sports i.e., Hibbett Sports and American Eagle go up and down completely randomly.

Pair Corralation between Hibbett Sports and American Eagle

If you would invest  1,947  in American Eagle Outfitters on September 1, 2024 and sell it today you would lose (23.00) from holding American Eagle Outfitters or give up 1.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Hibbett Sports  vs.  American Eagle Outfitters

Hibbett Sports

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hibbett Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Hibbett Sports is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 very healthy technical and fundamental indicators, American Eagle is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hibbett Sports and American Eagle

The main advantage of trading using opposite Hibbett Sports and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hibbett Sports 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 Hibbett Sports 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.