Correlation Between Duluth Holdings and Urban Outfitters

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

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

Diversification Opportunities for Duluth Holdings and Urban Outfitters

-0.45

Correlation Coefficient

Duluth Holdings  Urban Outfitters

Very good diversification

The 3 months correlation between Duluth and Urban is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Duluth Holdings and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and Duluth Holdings 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 Duluth Holdings 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 Duluth Holdings i.e., Duluth Holdings and Urban Outfitters go up and down completely randomly.

Pair Corralation between Duluth Holdings and Urban Outfitters

Given the investment horizon of 90 days Duluth Holdings is expected to under-perform the Urban Outfitters. But the stock apears to be less risky and, when comparing its historical volatility, Duluth Holdings is 1.09 times less risky than Urban Outfitters. The stock trades about -0.08 of its potential returns per unit of risk. The Urban Outfitters is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,666  in Urban Outfitters on September 14, 2024 and sell it today you would earn a total of  1,511  from holding Urban Outfitters or generate 41.22% return on investment over 90 days.

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

Duluth Holdings  vs.  Urban Outfitters

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Urban Outfitters

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Urban Outfitters displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duluth Holdings and Urban Outfitters

The main advantage of trading using opposite Duluth Holdings and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duluth Holdings 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' long position.

The idea behind Duluth Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.