Correlation Between NEW MILLENNIUM and URBAN OUTFITTERS

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

By analyzing existing cross correlation between NEW MILLENNIUM IRON and URBAN OUTFITTERS, you can compare the effects of market volatilities on NEW MILLENNIUM and URBAN OUTFITTERS 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 NEW MILLENNIUM with a short position of URBAN OUTFITTERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and URBAN OUTFITTERS.

Diversification Opportunities for NEW MILLENNIUM and URBAN OUTFITTERS

0.07

Correlation Coefficient

NEW MILLENNIUM  URBAN OUTFITTERS

Significant diversification

The 3 months correlation between NEW and URBAN is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and URBAN OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URBAN OUTFITTERS and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with URBAN OUTFITTERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URBAN OUTFITTERS has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and URBAN OUTFITTERS go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and URBAN OUTFITTERS

Assuming the 90 days trading horizon NEW MILLENNIUM is expected to generate 9.4 times less return on investment than URBAN OUTFITTERS. But when comparing it to its historical volatility, NEW MILLENNIUM IRON is 1.49 times less risky than URBAN OUTFITTERS. It trades about 0.05 of its potential returns per unit of risk. URBAN OUTFITTERS is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,240  in URBAN OUTFITTERS on October 25, 2024 and sell it today you would earn a total of  2,410  from holding URBAN OUTFITTERS or generate 74.38% return on investment over 90 days.

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

NEW MILLENNIUM IRON  vs.  URBAN OUTFITTERS

NEW MILLENNIUM IRON

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NEW MILLENNIUM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

URBAN OUTFITTERS

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in URBAN OUTFITTERS are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, URBAN OUTFITTERS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW MILLENNIUM and URBAN OUTFITTERS

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

The idea behind NEW MILLENNIUM IRON and URBAN 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.