Correlation Between Boot Barn and American Eagle
Can any of the company-specific risk be diversified away by investing in both Boot Barn and American Eagle 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 Boot Barn and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boot Barn Holdings and American Eagle Outfitters, you can compare the effects of market volatilities on Boot Barn and American Eagle 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 Boot Barn with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and American Eagle.
Diversification Opportunities for Boot Barn and American Eagle
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Boot and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Boot Barn i.e., Boot Barn and American Eagle go up and down completely randomly.
Pair Corralation between Boot Barn and American Eagle
Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 0.85 times more return on investment than American Eagle. However, Boot Barn Holdings is 1.18 times less risky than American Eagle. It trades about -0.09 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.11 per unit of risk. If you would invest 10,316 in Boot Barn Holdings on January 9, 2025 and sell it today you would lose (1,124) from holding Boot Barn Holdings or give up 10.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boot Barn Holdings vs. American Eagle Outfitters
Performance |
| Timeline |
| Boot Barn Holdings |
| American Eagle Outfitters |
Boot Barn and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boot Barn and American Eagle
The main advantage of trading using opposite Boot Barn and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boot Barn position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| Boot Barn vs. Ross Stores | Boot Barn vs. Childrens Place | Boot Barn vs. Buckle Inc | Boot Barn vs. Guess Inc |
| American Eagle vs. Urban Outfitters | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place | American Eagle vs. Abercrombie Fitch |
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 CEOs Directory module to screen CEOs from public companies around the world.
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