Correlation Between Urban Outfitters and Oracle

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

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

Diversification Opportunities for Urban Outfitters and Oracle

-0.42

Correlation Coefficient

Urban Outfitters  Oracle

Very good diversification

The 3 months correlation between Urban and Oracle is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Oracle go up and down completely randomly.

Pair Corralation between Urban Outfitters and Oracle

Assuming the 90 days horizon Urban Outfitters is expected to generate 1.15 times more return on investment than Oracle. However, Urban Outfitters is 1.15 times more volatile than Oracle. It trades about 0.37 of its potential returns per unit of risk. Oracle is currently generating about 0.08 per unit of risk. If you would invest  3,220  in Urban Outfitters on October 25, 2024 and sell it today you would earn a total of  2,630  from holding Urban Outfitters or generate 81.68% return on investment over 90 days.

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

Urban Outfitters  vs.  Oracle

Urban Outfitters

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 29 (%) 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.

Oracle

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Urban Outfitters and Oracle

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

The idea behind Urban Outfitters and Oracle 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.