Correlation Between Wayfair and American Eagle

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

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

Diversification Opportunities for Wayfair and American Eagle

-0.21

Correlation Coefficient

Wayfair  American Eagle

Very good diversification

The 3 months correlation between Wayfair and American is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair 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 Wayfair 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 Wayfair 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 Wayfair i.e., Wayfair and American Eagle go up and down completely randomly.

Pair Corralation between Wayfair and American Eagle

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.01 times more return on investment than American Eagle. However, Wayfair is 1.01 times more volatile than American Eagle Outfitters. It trades about 0.35 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.09 per unit of risk. If you would invest  3,045  in Wayfair on May 7, 2025 and sell it today you would earn a total of  4,303  from holding Wayfair or generate 141.31% return on investment over 90 days.

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

Wayfair  vs.  American Eagle Outfitters

Wayfair

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Wayfair are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Wayfair showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Wayfair and American Eagle

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

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.