Correlation Between American Eagle and Abercrombie Fitch
Can any of the company-specific risk be diversified away by investing in both American Eagle and Abercrombie Fitch 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 Abercrombie Fitch 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 Abercrombie Fitch, you can compare the effects of market volatilities on American Eagle and Abercrombie Fitch 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 Abercrombie Fitch. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Abercrombie Fitch.
Diversification Opportunities for American Eagle and Abercrombie Fitch
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Abercrombie is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Abercrombie Fitch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch 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 Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of American Eagle i.e., American Eagle and Abercrombie Fitch go up and down completely randomly.
Pair Corralation between American Eagle and Abercrombie Fitch
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Abercrombie Fitch. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.74 times less risky than Abercrombie Fitch. The stock trades about -0.27 of its potential returns per unit of risk. The Abercrombie Fitch is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 14,782 in Abercrombie Fitch on August 24, 2024 and sell it today you would earn a total of 247.00 from holding Abercrombie Fitch or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Abercrombie Fitch
Performance |
| Timeline |
| American Eagle Outfitters |
| Abercrombie Fitch |
American Eagle and Abercrombie Fitch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Abercrombie Fitch
The main advantage of trading using opposite American Eagle and Abercrombie Fitch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Abercrombie Fitch 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 Abercrombie Fitch will offset losses from the drop in Abercrombie Fitch's long position.| American Eagle vs. Urban Outfitters | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place | American Eagle vs. Abercrombie Fitch |
| Abercrombie Fitch vs. Urban Outfitters | Abercrombie Fitch vs. Foot Locker | Abercrombie Fitch vs. Childrens Place | Abercrombie Fitch vs. American Eagle Outfitters |
Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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