Correlation Between Urbana and Clarke
Can any of the company-specific risk be diversified away by investing in both Urbana and Clarke 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 Urbana and Clarke into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Urbana and Clarke Inc, you can compare the effects of market volatilities on Urbana and Clarke 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 Urbana with a short position of Clarke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urbana and Clarke.
Diversification Opportunities for Urbana and Clarke
Excellent diversification
The 3 months correlation between Urbana and Clarke is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Urbana and Clarke Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarke Inc and Urbana 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 Urbana are associated (or correlated) with Clarke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarke Inc has no effect on the direction of Urbana i.e., Urbana and Clarke go up and down completely randomly.
Pair Corralation between Urbana and Clarke
Assuming the 90 days trading horizon Urbana is expected to generate 1.79 times less return on investment than Clarke. But when comparing it to its historical volatility, Urbana is 1.12 times less risky than Clarke. It trades about 0.06 of its potential returns per unit of risk. Clarke Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,225 in Clarke Inc on September 1, 2024 and sell it today you would earn a total of 1,155 from holding Clarke Inc or generate 94.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
Urbana vs. Clarke Inc
Performance |
| Timeline |
| Urbana |
| Clarke Inc |
Urbana and Clarke Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Urbana and Clarke
The main advantage of trading using opposite Urbana and Clarke positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urbana position performs unexpectedly, Clarke 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 Clarke will offset losses from the drop in Clarke's long position.| Urbana vs. Canadian Imperial Bank | Urbana vs. Goodfood Market Corp | Urbana vs. First National Financial | Urbana vs. High Liner Foods |
| Clarke vs. Terravest Capital | Clarke vs. Clairvest Group | Clarke vs. Algoma Central | Clarke vs. Accord Financial Corp |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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