Correlation Between Amazon and URBAN OUTFITTERS
Can any of the company-specific risk be diversified away by investing in both Amazon and URBAN OUTFITTERS 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 Amazon and URBAN OUTFITTERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and URBAN OUTFITTERS, you can compare the effects of market volatilities on Amazon and URBAN OUTFITTERS 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 Amazon with a short position of URBAN OUTFITTERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and URBAN OUTFITTERS.
Diversification Opportunities for Amazon and URBAN OUTFITTERS
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and URBAN is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and URBAN OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URBAN OUTFITTERS and Amazon 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 Amazon Inc are associated (or correlated) with URBAN OUTFITTERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URBAN OUTFITTERS has no effect on the direction of Amazon i.e., Amazon and URBAN OUTFITTERS go up and down completely randomly.
Pair Corralation between Amazon and URBAN OUTFITTERS
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.73 times more return on investment than URBAN OUTFITTERS. However, Amazon Inc is 1.36 times less risky than URBAN OUTFITTERS. It trades about 0.1 of its potential returns per unit of risk. URBAN OUTFITTERS is currently generating about 0.04 per unit of risk. If you would invest 8,414 in Amazon Inc on August 28, 2024 and sell it today you would earn a total of 10,692 from holding Amazon Inc or generate 127.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. URBAN OUTFITTERS
Performance |
| Timeline |
| Amazon Inc |
| URBAN OUTFITTERS |
Amazon and URBAN OUTFITTERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and URBAN OUTFITTERS
The main advantage of trading using opposite Amazon and URBAN OUTFITTERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, URBAN OUTFITTERS 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 URBAN OUTFITTERS will offset losses from the drop in URBAN OUTFITTERS's long position.| Amazon vs. Big 5 Sporting | Amazon vs. Gold Road Resources | Amazon vs. Fukuyama Transporting Co | Amazon vs. Gaztransport Technigaz SA |
| URBAN OUTFITTERS vs. Apple Inc | URBAN OUTFITTERS vs. Apple Inc | URBAN OUTFITTERS vs. Apple Inc | URBAN OUTFITTERS vs. Microsoft |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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