Correlation Between Express and Urban Outfitters

Can any of the company-specific risk be diversified away by investing in both Express 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 Express and Urban Outfitters into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Express and Urban Outfitters, you can compare the effects of market volatilities on Express 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 Express with a short position of Urban Outfitters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Express and Urban Outfitters.

Diversification Opportunities for Express and Urban Outfitters

0.02

Correlation Coefficient

Express  Urban Outfitters

Significant diversification

The 3 months correlation between Express and Urban is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Express and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and Express 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 Express 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 Express i.e., Express and Urban Outfitters go up and down completely randomly.

Pair Corralation between Express and Urban Outfitters

If you would invest  3,632  in Urban Outfitters on August 30, 2024 and sell it today you would earn a total of  1,117  from holding Urban Outfitters or generate 30.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Express  vs.  Urban Outfitters

Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Express is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Urban Outfitters

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Urban Outfitters displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Express and Urban Outfitters

The main advantage of trading using opposite Express and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Express 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.

The idea behind Express and Urban Outfitters pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.