Correlation Between Urban Outfitters and Block

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

Diversification Opportunities for Urban Outfitters and Block

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Urban and Block is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc 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 Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Block go up and down completely randomly.

Pair Corralation between Urban Outfitters and Block

Given the investment horizon of 90 days Urban Outfitters is expected to generate 0.85 times more return on investment than Block. However, Urban Outfitters is 1.18 times less risky than Block. It trades about -0.03 of its potential returns per unit of risk. Block Inc is currently generating about -0.28 per unit of risk. If you would invest  2,082  in Urban Outfitters on July 5, 2022 and sell it today you would lose (117.00)  from holding Urban Outfitters or give up 5.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Urban Outfitters  vs.  Block Inc

 Performance (%) 
       Timeline  
Urban Outfitters 
Urban Performance
0 of 100
Over the last 90 days Urban Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Urban Outfitters is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Urban Price Channel

Block Inc 
Block Performance
0 of 100
Over the last 90 days Block Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in November 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Block Price Channel

Urban Outfitters and Block Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Urban Outfitters and Block

The main advantage of trading using opposite Urban Outfitters and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Outfitters position performs unexpectedly, Block 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 Block will offset losses from the drop in Block's long position.
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The idea behind Urban Outfitters and Block Inc 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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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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