Correlation Between Urban Outfitters and Zumiez

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

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

Diversification Opportunities for Urban Outfitters and Zumiez

-0.34

Correlation Coefficient

Urban Outfitters  Zumiez

Very good diversification

The 3 months correlation between Urban and Zumiez is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc 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 Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Zumiez go up and down completely randomly.

Pair Corralation between Urban Outfitters and Zumiez

Given the investment horizon of 90 days Urban Outfitters is expected to generate 0.85 times more return on investment than Zumiez. However, Urban Outfitters is 1.17 times less risky than Zumiez. It trades about 0.07 of its potential returns per unit of risk. Zumiez Inc is currently generating about 0.0 per unit of risk. If you would invest  2,556  in Urban Outfitters on September 25, 2024 and sell it today you would earn a total of  2,909  from holding Urban Outfitters or generate 113.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Urban Outfitters  vs.  Zumiez Inc

Urban Outfitters

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Urban Outfitters displayed solid returns over the last few months and may actually be approaching a breakup point.

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Urban Outfitters and Zumiez

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

The idea behind Urban Outfitters and Zumiez Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.