Correlation Between Industria and Urban Outfitters

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

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

Diversification Opportunities for Industria and Urban Outfitters

-0.44

Correlation Coefficient

Industria  Urban Outfitters

Very good diversification

The 3 months correlation between Industria and Urban is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseo and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and Industria 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 Industria de Diseo 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 Industria i.e., Industria and Urban Outfitters go up and down completely randomly.

Pair Corralation between Industria and Urban Outfitters

Assuming the 90 days horizon Industria de Diseo is expected to under-perform the Urban Outfitters. But the pink sheet apears to be less risky and, when comparing its historical volatility, Industria de Diseo is 1.48 times less risky than Urban Outfitters. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Urban Outfitters is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  4,046  in Urban Outfitters on September 25, 2024 and sell it today you would earn a total of  1,419  from holding Urban Outfitters or generate 35.07% return on investment over 90 days.

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

Industria de Diseo  vs.  Urban Outfitters

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Urban Outfitters

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 16 (%) 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 Industria and Urban Outfitters

The main advantage of trading using opposite Industria and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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 Industria de Diseo 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..