Correlation Between Urban Outfitters and Shoe Carnival

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

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

Diversification Opportunities for Urban Outfitters and Shoe Carnival

0.4

Correlation Coefficient

Urban Outfitters  Shoe Carnival

Very weak diversification

The 3 months correlation between Urban and Shoe is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival 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 Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Shoe Carnival go up and down completely randomly.

Pair Corralation between Urban Outfitters and Shoe Carnival

Given the investment horizon of 90 days Urban Outfitters is expected to generate 1.3 times more return on investment than Shoe Carnival. However, Urban Outfitters is 1.3 times more volatile than Shoe Carnival. It trades about -0.02 of its potential returns per unit of risk. Shoe Carnival is currently generating about -0.3 per unit of risk. If you would invest  5,518  in Urban Outfitters on December 28, 2024 and sell it today you would lose (336.00) from holding Urban Outfitters or give up 6.09% of portfolio value over 90 days.

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

Urban Outfitters  vs.  Shoe Carnival

Urban Outfitters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Urban Outfitters is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Shoe Carnival

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoe Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Urban Outfitters and Shoe Carnival

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

The idea behind Urban Outfitters and Shoe Carnival 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .