Correlation Between URBAN OUTFITTERS and Fortune Brands

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

By analyzing existing cross correlation between URBAN OUTFITTERS and Fortune Brands Home, you can compare the effects of market volatilities on URBAN OUTFITTERS and Fortune Brands 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 Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of URBAN OUTFITTERS and Fortune Brands.

Diversification Opportunities for URBAN OUTFITTERS and Fortune Brands

-0.73

Correlation Coefficient

URBAN OUTFITTERS  Fortune Brands

Pay attention - limited upside

The 3 months correlation between URBAN and Fortune is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding URBAN OUTFITTERS and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home 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 Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of URBAN OUTFITTERS i.e., URBAN OUTFITTERS and Fortune Brands go up and down completely randomly.

Pair Corralation between URBAN OUTFITTERS and Fortune Brands

Assuming the 90 days trading horizon URBAN OUTFITTERS is expected to generate 1.68 times more return on investment than Fortune Brands. However, URBAN OUTFITTERS is 1.68 times more volatile than Fortune Brands Home. It trades about 0.29 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.17 per unit of risk. If you would invest  3,260  in URBAN OUTFITTERS on October 10, 2024 and sell it today you would earn a total of  2,340  from holding URBAN OUTFITTERS or generate 71.78% return on investment over 90 days.

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

URBAN OUTFITTERS  vs.  Fortune Brands Home

URBAN OUTFITTERS

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in URBAN OUTFITTERS are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, URBAN OUTFITTERS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fortune Brands Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Brands Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with URBAN OUTFITTERS and Fortune Brands

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

The idea behind URBAN OUTFITTERS and Fortune Brands Home 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.