Correlation Between Ralph Lauren and American Eagle
Can any of the company-specific risk be diversified away by investing in both Ralph Lauren 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 Ralph Lauren and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ralph Lauren Corp and American Eagle Outfitters, you can compare the effects of market volatilities on Ralph Lauren 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 Ralph Lauren with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and American Eagle.
Diversification Opportunities for Ralph Lauren and American Eagle
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ralph and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp 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 Ralph Lauren 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 Ralph Lauren Corp 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 Ralph Lauren i.e., Ralph Lauren and American Eagle go up and down completely randomly.
Pair Corralation between Ralph Lauren and American Eagle
Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.93 times more return on investment than American Eagle. However, Ralph Lauren Corp is 1.08 times less risky than American Eagle. It trades about 0.33 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.01 per unit of risk. If you would invest 19,766 in Ralph Lauren Corp on September 2, 2024 and sell it today you would earn a total of 3,374 from holding Ralph Lauren Corp or generate 17.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ralph Lauren Corp vs. American Eagle Outfitters
Performance |
| Timeline |
| Ralph Lauren Corp |
| American Eagle Outfitters |
Ralph Lauren and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ralph Lauren and American Eagle
The main advantage of trading using opposite Ralph Lauren and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren 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.| Ralph Lauren vs. VF Corporation | Ralph Lauren vs. Levi Strauss Co | Ralph Lauren vs. Columbia Sportswear | Ralph Lauren vs. Oxford Industries |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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