Correlation Between JJill and American Eagle
Can any of the company-specific risk be diversified away by investing in both JJill 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 JJill and American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JJill Inc and American Eagle Outfitters, you can compare the effects of market volatilities on JJill 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 JJill with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of JJill and American Eagle.
Diversification Opportunities for JJill and American Eagle
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between JJill and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding JJill Inc 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 JJill 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 JJill Inc 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 JJill i.e., JJill and American Eagle go up and down completely randomly.
Pair Corralation between JJill and American Eagle
Given the investment horizon of 90 days JJill Inc is expected to generate 1.71 times more return on investment than American Eagle. However, JJill is 1.71 times more volatile than American Eagle Outfitters. It trades about -0.04 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.22 per unit of risk. If you would invest 2,647 in JJill Inc on January 20, 2024 and sell it today you would lose (119.00) from holding JJill Inc or give up 4.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
JJill Inc vs. American Eagle Outfitters
Performance |
| Timeline |
| JJill Inc |
| American Eagle Outfitters |
JJill and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JJill and American Eagle
The main advantage of trading using opposite JJill and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JJill 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 JJill Inc 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.| American Eagle vs. Urban Outfitters | American Eagle vs. Gap Inc | American Eagle vs. Foot Locker | American Eagle vs. Childrens Place |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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