Correlation Between American Eagle and Dillards

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

Diversification Opportunities for American Eagle and Dillards

0.03

Correlation Coefficient

American Eagle  Dillards

Significant diversification

The 3 months correlation between American and Dillards is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards 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 Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of American Eagle i.e., American Eagle and Dillards go up and down completely randomly.

Pair Corralation between American Eagle and Dillards

Considering the 90-day investment horizon American Eagle is expected to generate 1.27 times less return on investment than Dillards. In addition to that, American Eagle is 1.6 times more volatile than Dillards. It trades about 0.09 of its total potential returns per unit of risk. Dillards is currently generating about 0.18 per unit of volatility. If you would invest  35,300  in Dillards on May 7, 2025 and sell it today you would earn a total of  11,540  from holding Dillards or generate 32.69% return on investment over 90 days.

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

American Eagle Outfitters  vs.  Dillards

American Eagle Outfitters

Risk-Adjusted Performance

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 fragile technical and fundamental indicators, American Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Dillards

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Eagle and Dillards

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

The idea behind American Eagle Outfitters and Dillards 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.