Correlation Between Chicos FAS and American Eagle

Can any of the company-specific risk be diversified away by investing in both Chicos FAS 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 Chicos FAS and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chicos FAS and American Eagle Outfitters, you can compare the effects of market volatilities on Chicos FAS 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 Chicos FAS with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chicos FAS and American Eagle.

Diversification Opportunities for Chicos FAS and American Eagle

0.59

Correlation Coefficient

Chicos FAS  American Eagle

Very weak diversification

The 3 months correlation between Chicos and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Chicos FAS 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 Chicos FAS 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 Chicos FAS 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 Chicos FAS i.e., Chicos FAS and American Eagle go up and down completely randomly.

Pair Corralation between Chicos FAS and American Eagle

If you would invest  759.00  in Chicos FAS on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Chicos FAS or generate 0.0% return on investment over 90 days.

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

Chicos FAS  vs.  American Eagle Outfitters

Chicos FAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chicos FAS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Chicos FAS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

American Eagle Outfitters

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Eagle Outfitters are ranked lower than 6 (%) 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.

Pair Trading with Chicos FAS and American Eagle

The main advantage of trading using opposite Chicos FAS and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chicos FAS 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.

The idea behind Chicos FAS and American Eagle Outfitters 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.