Correlation Between American Eagle and Lanvin Group

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

Diversification Opportunities for American Eagle and Lanvin Group

-0.37

Correlation Coefficient

American Eagle  Lanvin Group

Very good diversification

The 3 months correlation between American and Lanvin is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Lanvin Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanvin Group Holdings 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 Lanvin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanvin Group Holdings has no effect on the direction of American Eagle i.e., American Eagle and Lanvin Group go up and down completely randomly.

Pair Corralation between American Eagle and Lanvin Group

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Lanvin Group. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 2.16 times less risky than Lanvin Group. The stock trades about -0.09 of its potential returns per unit of risk. The Lanvin Group Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Lanvin Group Holdings on March 12, 2024 and sell it today you would lose (1.00) from holding Lanvin Group Holdings or give up 0.64% of portfolio value over 90 days.

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

American Eagle Outfitters  vs.  Lanvin Group Holdings

American Eagle Outfitters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Eagle Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, American Eagle is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lanvin Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lanvin Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with American Eagle and Lanvin Group

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

The idea behind American Eagle Outfitters and Lanvin Group Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.