Correlation Between Caseys General and Urban Outfitters
Can any of the company-specific risk be diversified away by investing in both Caseys General 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 Caseys General and Urban Outfitters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caseys General Stores and Urban Outfitters, you can compare the effects of market volatilities on Caseys General 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 Caseys General with a short position of Urban Outfitters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Urban Outfitters.
Diversification Opportunities for Caseys General and Urban Outfitters
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caseys and Urban is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and Urban Outfitters go up and down completely randomly.
Pair Corralation between Caseys General and Urban Outfitters
Assuming the 90 days trading horizon Caseys General Stores is expected to under-perform the Urban Outfitters. But the stock apears to be less risky and, when comparing its historical volatility, Caseys General Stores is 2.83 times less risky than Urban Outfitters. The stock trades about -0.03 of its potential returns per unit of risk. The Urban Outfitters is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,300 in Urban Outfitters on October 25, 2024 and sell it today you would earn a total of 550.00 from holding Urban Outfitters or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caseys General Stores vs. Urban Outfitters
Performance |
| Timeline |
| Caseys General Stores |
| Urban Outfitters |
Caseys General and Urban Outfitters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caseys General and Urban Outfitters
The main advantage of trading using opposite Caseys General and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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.| Caseys General vs. Apple Inc | Caseys General vs. Apple Inc | Caseys General vs. Apple Inc | Caseys General vs. Apple Inc |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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