Correlation Between Urban Outfitters and British American
Can any of the company-specific risk be diversified away by investing in both Urban Outfitters and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Urban Outfitters and British American Tobacco, you can compare the effects of market volatilities on Urban Outfitters and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Outfitters and British American.
Diversification Opportunities for Urban Outfitters and British American
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Urban and British is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and British American go up and down completely randomly.
Pair Corralation between Urban Outfitters and British American
Assuming the 90 days horizon Urban Outfitters is expected to generate 2.59 times more return on investment than British American. However, Urban Outfitters is 2.59 times more volatile than British American Tobacco. It trades about 0.11 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest 4,260 in Urban Outfitters on October 26, 2024 and sell it today you would earn a total of 1,590 from holding Urban Outfitters or generate 37.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Urban Outfitters vs. British American Tobacco
Performance |
| Timeline |
| Urban Outfitters |
| British American Tobacco |
Urban Outfitters and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Urban Outfitters and British American
The main advantage of trading using opposite Urban Outfitters and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Outfitters position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Urban Outfitters vs. The TJX Companies | Urban Outfitters vs. Lululemon Athletica | Urban Outfitters vs. Superior Plus Corp | Urban Outfitters vs. Origin Agritech |
| British American vs. Laureate Education | British American vs. TOMBADOR IRON LTD | British American vs. Urban Outfitters | British American vs. The Japan Steel |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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