Correlation Between Gladstone Investment and URBAN OUTFITTERS

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

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

Diversification Opportunities for Gladstone Investment and URBAN OUTFITTERS

0.44

Correlation Coefficient

Gladstone Investment  URBAN OUTFITTERS

Very weak diversification

The 3 months correlation between Gladstone and URBAN is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and URBAN OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URBAN OUTFITTERS and Gladstone Investment 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 Gladstone Investment 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 Gladstone Investment i.e., Gladstone Investment and URBAN OUTFITTERS go up and down completely randomly.

Pair Corralation between Gladstone Investment and URBAN OUTFITTERS

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.91 times less return on investment than URBAN OUTFITTERS. But when comparing it to its historical volatility, Gladstone Investment is 1.55 times less risky than URBAN OUTFITTERS. It trades about 0.15 of its potential returns per unit of risk. URBAN OUTFITTERS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,360  in URBAN OUTFITTERS on September 4, 2024 and sell it today you would earn a total of  1,440  from holding URBAN OUTFITTERS or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Gladstone Investment  vs.  URBAN OUTFITTERS

Gladstone Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment reported solid returns over the last few months and may actually be approaching a breakup point.

URBAN OUTFITTERS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in URBAN OUTFITTERS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, URBAN OUTFITTERS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gladstone Investment and URBAN OUTFITTERS

The main advantage of trading using opposite Gladstone Investment and URBAN OUTFITTERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gladstone Investment 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 Gladstone Investment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.