Correlation Between G-III APPAREL and URBAN OUTFITTERS

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

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

Diversification Opportunities for G-III APPAREL and URBAN OUTFITTERS

0.79

Correlation Coefficient

G-III APPAREL  URBAN OUTFITTERS

Poor diversification

The 3 months correlation between G-III and URBAN is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding G III APPAREL GROUP and URBAN OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URBAN OUTFITTERS and G-III APPAREL 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 G III APPAREL GROUP 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 G-III APPAREL i.e., G-III APPAREL and URBAN OUTFITTERS go up and down completely randomly.

Pair Corralation between G-III APPAREL and URBAN OUTFITTERS

Assuming the 90 days trading horizon G III APPAREL GROUP is expected to generate 1.22 times more return on investment than URBAN OUTFITTERS. However, G-III APPAREL is 1.22 times more volatile than URBAN OUTFITTERS. It trades about 0.06 of its potential returns per unit of risk. URBAN OUTFITTERS is currently generating about 0.07 per unit of risk. If you would invest  1,410  in G III APPAREL GROUP on October 4, 2024 and sell it today you would earn a total of  1,690  from holding G III APPAREL GROUP or generate 119.86% return on investment over 90 days.

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

G III APPAREL GROUP  vs.  URBAN OUTFITTERS

G III APPAREL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G III APPAREL GROUP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, G-III APPAREL exhibited solid returns over the last few months and may actually be approaching a breakup point.

URBAN OUTFITTERS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in URBAN OUTFITTERS are ranked lower than 19 (%) 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 G-III APPAREL and URBAN OUTFITTERS

The main advantage of trading using opposite G-III APPAREL and URBAN OUTFITTERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III APPAREL 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 G III APPAREL GROUP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.