Correlation Between Urban Outfitters and China DatangRenewable

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

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

Diversification Opportunities for Urban Outfitters and China DatangRenewable

0.59

Correlation Coefficient

Urban Outfitters  China DatangRenewable

Very weak diversification

The 3 months correlation between Urban and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China DatangRenewable and Urban Outfitters 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 Outfitters are associated (or correlated) with China DatangRenewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China DatangRenewable has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and China DatangRenewable go up and down completely randomly.

Pair Corralation between Urban Outfitters and China DatangRenewable

Assuming the 90 days horizon Urban Outfitters is expected to generate 0.87 times more return on investment than China DatangRenewable. However, Urban Outfitters is 1.15 times less risky than China DatangRenewable. It trades about 0.48 of its potential returns per unit of risk. China Datang is currently generating about 0.21 per unit of risk. If you would invest  4,720  in Urban Outfitters on October 9, 2024 and sell it today you would earn a total of  880.00  from holding Urban Outfitters or generate 18.64% return on investment over 90 days.

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

Urban Outfitters  vs.  China Datang

Urban Outfitters

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Urban Outfitters reported solid returns over the last few months and may actually be approaching a breakup point.

China DatangRenewable

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China DatangRenewable reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Urban Outfitters and China DatangRenewable

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

The idea behind Urban Outfitters and China Datang 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.