Correlation Between American Eagle and JD Sports
Can any of the company-specific risk be diversified away by investing in both American Eagle and JD Sports 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 JD Sports 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 JD Sports Fashion, you can compare the effects of market volatilities on American Eagle and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and JD Sports.
Diversification Opportunities for American Eagle and JD Sports
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and JDDSF is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of American Eagle i.e., American Eagle and JD Sports go up and down completely randomly.
Pair Corralation between American Eagle and JD Sports
Considering the 90-day investment horizon American Eagle is expected to generate 1.6 times less return on investment than JD Sports. But when comparing it to its historical volatility, American Eagle Outfitters is 1.82 times less risky than JD Sports. It trades about 0.03 of its potential returns per unit of risk. JD Sports Fashion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 109.00 in JD Sports Fashion on September 3, 2024 and sell it today you would earn a total of 37.00 from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. JD Sports Fashion
Performance |
| Timeline |
| American Eagle Outfitters |
| JD Sports Fashion |
American Eagle and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and JD Sports
The main advantage of trading using opposite American Eagle and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.| American Eagle vs. Ross Stores | American Eagle vs. Childrens Place | American Eagle vs. Buckle Inc | American Eagle vs. Guess Inc |
| JD Sports vs. Guess Inc | JD Sports vs. Foot Locker | JD Sports vs. JPMorgan Chase Co | JD Sports vs. Home Depot |
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 Stocks Directory module to find actively traded stocks across global markets.
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