Correlation Between Fast Retailing and Urban Outfitters
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and Urban Outfitters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Urban Outfitters, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of Urban Outfitters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Urban Outfitters.
Diversification Opportunities for Fast Retailing and Urban Outfitters
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fast and Urban is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Urban Outfitters go up and down completely randomly.
Pair Corralation between Fast Retailing and Urban Outfitters
Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Urban Outfitters. But the stock apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.49 times less risky than Urban Outfitters. The stock trades about -0.07 of its potential returns per unit of risk. The Urban Outfitters is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 4,720 in Urban Outfitters on October 9, 2024 and sell it today you would earn a total of 780.00 from holding Urban Outfitters or generate 16.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Urban Outfitters
Performance |
| Timeline |
| Fast Retailing |
| Urban Outfitters |
Fast Retailing and Urban Outfitters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Urban Outfitters
The main advantage of trading using opposite Fast Retailing and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. CAIRN HOMES EO | Fast Retailing vs. Tyson Foods | Fast Retailing vs. The Home Depot | Fast Retailing vs. Focus Home Interactive |
| Urban Outfitters vs. Transport International Holdings | Urban Outfitters vs. Caseys General Stores | Urban Outfitters vs. Yuexiu Transport Infrastructure | Urban Outfitters vs. Ross Stores |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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