Correlation Between Urban Outfitters and Loews Corp

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

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

Diversification Opportunities for Urban Outfitters and Loews Corp

0.3

Correlation Coefficient

Urban Outfitters  Loews Corp

Weak diversification

The 3 months correlation between Urban and Loews is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Loews Corp go up and down completely randomly.

Pair Corralation between Urban Outfitters and Loews Corp

Assuming the 90 days horizon Urban Outfitters is expected to generate 1.74 times more return on investment than Loews Corp. However, Urban Outfitters is 1.74 times more volatile than Loews Corp. It trades about 0.36 of its potential returns per unit of risk. Loews Corp is currently generating about 0.09 per unit of risk. If you would invest  3,260  in Urban Outfitters on October 26, 2024 and sell it today you would earn a total of  2,590  from holding Urban Outfitters or generate 79.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Urban Outfitters  vs.  Loews Corp

Urban Outfitters

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 28 (%) 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.

Loews Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Urban Outfitters and Loews Corp

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

The idea behind Urban Outfitters and Loews Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.