Correlation Between Retail Opportunity and Urban Edge

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

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

Diversification Opportunities for Retail Opportunity and Urban Edge

-0.8

Correlation Coefficient

Retail Opportunity  Urban Edge

Pay attention - limited upside

The 3 months correlation between Retail and Urban is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Retail Opportunity Investments and Urban Edge Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Edge Properties and Retail Opportunity 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 Retail Opportunity Investments are associated (or correlated) with Urban Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Edge Properties has no effect on the direction of Retail Opportunity i.e., Retail Opportunity and Urban Edge go up and down completely randomly.

Pair Corralation between Retail Opportunity and Urban Edge

Given the investment horizon of 90 days Retail Opportunity Investments is expected to generate 0.03 times more return on investment than Urban Edge. However, Retail Opportunity Investments is 36.41 times less risky than Urban Edge. It trades about 0.33 of its potential returns per unit of risk. Urban Edge Properties is currently generating about -0.04 per unit of risk. If you would invest  1,746  in Retail Opportunity Investments on February 3, 2025 and sell it today you would earn a total of  3.00  from holding Retail Opportunity Investments or generate 0.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	14.06%
Values	Daily Returns

Retail Opportunity Investments  vs.  Urban Edge Properties

Retail Opportunity

Risk-Adjusted Performance

Strong

Over the last 90 days Retail Opportunity Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Retail Opportunity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Urban Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Retail Opportunity and Urban Edge

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

The idea behind Retail Opportunity Investments and Urban Edge Properties 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.