Correlation Between Urban Edge and Retail Opportunity

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

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

Diversification Opportunities for Urban Edge and Retail Opportunity

0.93

Correlation Coefficient

Urban Edge  Retail Opportunity

Almost no diversification

The 3 months correlation between Urban and Retail is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and Retail Opportunity Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Opportunity and Urban Edge 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 Urban Edge Properties are associated (or correlated) with Retail Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Opportunity has no effect on the direction of Urban Edge i.e., Urban Edge and Retail Opportunity go up and down completely randomly.

Pair Corralation between Urban Edge and Retail Opportunity

Allowing for the 90-day total investment horizon Urban Edge is expected to generate 1.43 times less return on investment than Retail Opportunity. But when comparing it to its historical volatility, Urban Edge Properties is 1.4 times less risky than Retail Opportunity. It trades about 0.17 of its potential returns per unit of risk. Retail Opportunity Investments is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,489  in Retail Opportunity Investments on September 3, 2024 and sell it today you would earn a total of  251.00  from holding Retail Opportunity Investments or generate 16.86% return on investment over 90 days.

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

Urban Edge Properties  vs.  Retail Opportunity Investments

Urban Edge Properties

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Urban Edge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Retail Opportunity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Opportunity Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Retail Opportunity exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Urban Edge and Retail Opportunity

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

The idea behind Urban Edge Properties and Retail Opportunity Investments 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.