Correlation Between Urban Outfitters and Longfor Group

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

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

Diversification Opportunities for Urban Outfitters and Longfor Group

-0.63

Correlation Coefficient

Urban Outfitters  Longfor Group

Excellent diversification

The 3 months correlation between Urban and Longfor is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group Holdings 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 Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Longfor Group go up and down completely randomly.

Pair Corralation between Urban Outfitters and Longfor Group

Assuming the 90 days horizon Urban Outfitters is expected to generate 0.77 times more return on investment than Longfor Group. However, Urban Outfitters is 1.3 times less risky than Longfor Group. It trades about 0.46 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about -0.37 per unit of risk. If you would invest  4,720  in Urban Outfitters on October 10, 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Urban Outfitters  vs.  Longfor Group Holdings

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 fragile basic indicators, Urban Outfitters reported solid returns over the last few months and may actually be approaching a breakup point.

Longfor Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Urban Outfitters and Longfor Group

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

The idea behind Urban Outfitters and Longfor Group Holdings 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.