Correlation Between American Eagle and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both American Eagle and Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture, you can compare the effects of market volatilities on American Eagle and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Hooker Furniture.
Diversification Opportunities for American Eagle and Hooker Furniture
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Hooker is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of American Eagle i.e., American Eagle and Hooker Furniture go up and down completely randomly.
Pair Corralation between American Eagle and Hooker Furniture
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Hooker Furniture. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.27 times less risky than Hooker Furniture. The stock trades about -0.02 of its potential returns per unit of risk. The Hooker Furniture is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,603 in Hooker Furniture on September 1, 2024 and sell it today you would earn a total of 270.00 from holding Hooker Furniture or generate 16.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Hooker Furniture
Performance |
| Timeline |
| American Eagle Outfitters |
| Hooker Furniture |
American Eagle and Hooker Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Hooker Furniture
The main advantage of trading using opposite American Eagle and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.| American Eagle vs. Capri Holdings | American Eagle vs. Movado Group | American Eagle vs. Tapestry | American Eagle vs. Brilliant Earth Group |
| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Willis Lease Finance | Hooker Furniture vs. Rocky Brands | Hooker Furniture vs. First Business Financial |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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