Correlation Between American Eagle and OReilly Automotive
Can any of the company-specific risk be diversified away by investing in both American Eagle and OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive, you can compare the effects of market volatilities on American Eagle and OReilly Automotive 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 OReilly Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and OReilly Automotive.
Diversification Opportunities for American Eagle and OReilly Automotive
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and OReilly is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive 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 OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of American Eagle i.e., American Eagle and OReilly Automotive go up and down completely randomly.
Pair Corralation between American Eagle and OReilly Automotive
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the OReilly Automotive. In addition to that, American Eagle is 1.91 times more volatile than OReilly Automotive. It trades about -0.09 of its total potential returns per unit of risk. OReilly Automotive is currently generating about 0.15 per unit of volatility. If you would invest 95,751 in OReilly Automotive on August 24, 2024 and sell it today you would earn a total of 24,723 from holding OReilly Automotive or generate 25.82% 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. OReilly Automotive
Performance |
| Timeline |
| American Eagle Outfitters |
| OReilly Automotive |
American Eagle and OReilly Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and OReilly Automotive
The main advantage of trading using opposite American Eagle and OReilly Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, OReilly Automotive 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 OReilly Automotive will offset losses from the drop in OReilly Automotive's long position.| American Eagle vs. Urban Outfitters | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place | American Eagle vs. Abercrombie Fitch |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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