Correlation Between American Eagle and Buckle

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

Diversification Opportunities for American Eagle and Buckle

0.55

Correlation Coefficient

American Eagle  Buckle

Very weak diversification

The 3 months correlation between American and Buckle is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Buckle Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buckle Inc 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 Buckle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buckle Inc has no effect on the direction of American Eagle i.e., American Eagle and Buckle go up and down completely randomly.

Pair Corralation between American Eagle and Buckle

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Buckle. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.01 times less risky than Buckle. The stock trades about -0.15 of its potential returns per unit of risk. The Buckle Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,770  in Buckle Inc on January 25, 2024 and sell it today you would earn a total of  34.00  from holding Buckle Inc or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

American Eagle Outfitters  vs.  Buckle Inc

American Eagle Outfitters

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Eagle Outfitters are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, American Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Buckle Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Buckle Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Buckle is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Eagle and Buckle

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

The idea behind American Eagle Outfitters and Buckle Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.