Correlation Between China Hongqiao and Urban Outfitters
Can any of the company-specific risk be diversified away by investing in both China Hongqiao 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 China Hongqiao and Urban Outfitters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Hongqiao Group and Urban Outfitters, you can compare the effects of market volatilities on China Hongqiao 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 China Hongqiao with a short position of Urban Outfitters. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and Urban Outfitters.
Diversification Opportunities for China Hongqiao and Urban Outfitters
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Urban is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and China Hongqiao 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 China Hongqiao Group 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 China Hongqiao i.e., China Hongqiao and Urban Outfitters go up and down completely randomly.
Pair Corralation between China Hongqiao and Urban Outfitters
Assuming the 90 days horizon China Hongqiao is expected to generate 1.7 times less return on investment than Urban Outfitters. But when comparing it to its historical volatility, China Hongqiao Group is 1.73 times less risky than Urban Outfitters. It trades about 0.08 of its potential returns per unit of risk. Urban Outfitters is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,576 in Urban Outfitters on November 1, 2024 and sell it today you would earn a total of 3,066 from holding Urban Outfitters or generate 119.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
China Hongqiao Group vs. Urban Outfitters
Performance |
| Timeline |
| China Hongqiao Group |
| Urban Outfitters |
China Hongqiao and Urban Outfitters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Hongqiao and Urban Outfitters
The main advantage of trading using opposite China Hongqiao and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao 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' long position.| China Hongqiao vs. Constellium Nv | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Alcoa Corp | China Hongqiao vs. China Hongqiao Group |
| Urban Outfitters vs. American Eagle Outfitters | Urban Outfitters vs. Foot Locker | Urban Outfitters vs. Childrens Place | Urban Outfitters vs. Abercrombie Fitch |
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.
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