Correlation Between American Eagle and Bed Bath

Can any of the company-specific risk be diversified away by investing in both American Eagle and Bed Bath 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 Bed Bath 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 Bed Bath Beyond, you can compare the effects of market volatilities on American Eagle and Bed Bath 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 Bed Bath. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Bed Bath.

Diversification Opportunities for American Eagle and Bed Bath

-0.44

Correlation Coefficient

American Eagle  Bed Bath

Very good diversification

The 3 months correlation between American and Bed is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Bed Bath Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bed Bath Beyond 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 Bed Bath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bed Bath Beyond has no effect on the direction of American Eagle i.e., American Eagle and Bed Bath go up and down completely randomly.

Pair Corralation between American Eagle and Bed Bath

If you would invest  30.00  in Bed Bath Beyond on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Bed Bath Beyond or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

American Eagle Outfitters  vs.  Bed Bath Beyond

American Eagle Outfitters

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Eagle Outfitters are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, American Eagle may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bed Bath is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Eagle and Bed Bath

The main advantage of trading using opposite American Eagle and Bed Bath positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, Bed Bath 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 Bed Bath will offset losses from the drop in Bed Bath's long position.

The idea behind American Eagle Outfitters and Bed Bath Beyond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.