Correlation Between URBAN OUTFITTERS and Kaiser Aluminum

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

By analyzing existing cross correlation between URBAN OUTFITTERS and Kaiser Aluminum, you can compare the effects of market volatilities on URBAN OUTFITTERS and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of URBAN OUTFITTERS and Kaiser Aluminum.

Diversification Opportunities for URBAN OUTFITTERS and Kaiser Aluminum

0.65

Correlation Coefficient

URBAN OUTFITTERS  Kaiser Aluminum

Poor diversification

The 3 months correlation between URBAN and Kaiser is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding URBAN OUTFITTERS and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of URBAN OUTFITTERS i.e., URBAN OUTFITTERS and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between URBAN OUTFITTERS and Kaiser Aluminum

Assuming the 90 days trading horizon URBAN OUTFITTERS is expected to generate 1.15 times more return on investment than Kaiser Aluminum. However, URBAN OUTFITTERS is 1.15 times more volatile than Kaiser Aluminum. It trades about 0.17 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.1 per unit of risk. If you would invest  3,240  in URBAN OUTFITTERS on September 3, 2024 and sell it today you would earn a total of  1,240  from holding URBAN OUTFITTERS or generate 38.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

URBAN OUTFITTERS  vs.  Kaiser Aluminum

URBAN OUTFITTERS

Risk-Adjusted Performance

13 of 100

Good

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

Kaiser Aluminum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with URBAN OUTFITTERS and Kaiser Aluminum

The main advantage of trading using opposite URBAN OUTFITTERS and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if URBAN OUTFITTERS position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.

The idea behind URBAN OUTFITTERS and Kaiser Aluminum 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.