Correlation Between American Eagle and Upbound
Can any of the company-specific risk be diversified away by investing in both American Eagle and Upbound 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 Upbound 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 Upbound Group, you can compare the effects of market volatilities on American Eagle and Upbound 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 Upbound. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Upbound.
Diversification Opportunities for American Eagle and Upbound
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Upbound is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Upbound Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upbound Group 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 Upbound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upbound Group has no effect on the direction of American Eagle i.e., American Eagle and Upbound go up and down completely randomly.
Pair Corralation between American Eagle and Upbound
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Upbound. In addition to that, American Eagle is 1.0 times more volatile than Upbound Group. It trades about -0.49 of its total potential returns per unit of risk. Upbound Group is currently generating about -0.24 per unit of volatility. If you would invest 2,963 in Upbound Group on November 28, 2024 and sell it today you would lose (318.00) from holding Upbound Group or give up 10.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Upbound Group
Performance |
| Timeline |
| American Eagle Outfitters |
| Upbound Group |
American Eagle and Upbound Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Upbound
The main advantage of trading using opposite American Eagle and Upbound positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Upbound 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 Upbound will offset losses from the drop in Upbound's long position.| American Eagle vs. Urban Outfitters | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place | American Eagle vs. Abercrombie Fitch |
| Upbound vs. JBG SMITH Properties | Upbound vs. Lincoln Electric Holdings | Upbound vs. Toro Co | Upbound vs. Rocky Brands |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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