Correlation Between DELTA AIR and URBAN OUTFITTERS

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Can any of the company-specific risk be diversified away by investing in both DELTA AIR 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 DELTA AIR and URBAN OUTFITTERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DELTA AIR LINES and URBAN OUTFITTERS, you can compare the effects of market volatilities on DELTA AIR 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 DELTA AIR with a short position of URBAN OUTFITTERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DELTA AIR and URBAN OUTFITTERS.

Diversification Opportunities for DELTA AIR and URBAN OUTFITTERS

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between DELTA and URBAN is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and URBAN OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URBAN OUTFITTERS and DELTA AIR 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 DELTA AIR LINES 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 DELTA AIR i.e., DELTA AIR and URBAN OUTFITTERS go up and down completely randomly.

Pair Corralation between DELTA AIR and URBAN OUTFITTERS

Assuming the 90 days trading horizon DELTA AIR is expected to generate 3.17 times less return on investment than URBAN OUTFITTERS. But when comparing it to its historical volatility, DELTA AIR LINES is 1.51 times less risky than URBAN OUTFITTERS. It trades about 0.14 of its potential returns per unit of risk. URBAN OUTFITTERS is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,400  in URBAN OUTFITTERS on September 27, 2024 and sell it today you would earn a total of  1,850  from holding URBAN OUTFITTERS or generate 54.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DELTA AIR LINES  vs.  URBAN OUTFITTERS

 Performance 
       Timeline  
DELTA AIR LINES 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in DELTA AIR LINES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DELTA AIR unveiled solid returns over the last few months and may actually be approaching a breakup point.
URBAN OUTFITTERS 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in URBAN OUTFITTERS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, URBAN OUTFITTERS unveiled solid returns over the last few months and may actually be approaching a breakup point.

DELTA AIR and URBAN OUTFITTERS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DELTA AIR and URBAN OUTFITTERS

The main advantage of trading using opposite DELTA AIR and URBAN OUTFITTERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DELTA AIR 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's long position.
The idea behind DELTA AIR LINES 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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