Correlation Between Ross Stores and Urban Outfitters

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

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

Diversification Opportunities for Ross Stores and Urban Outfitters

-0.34

Correlation Coefficient

Ross Stores  Urban Outfitters

Very good diversification

The 3 months correlation between Ross and Urban is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters and Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and Urban Outfitters go up and down completely randomly.

Pair Corralation between Ross Stores and Urban Outfitters

Given the investment horizon of 90 days Ross Stores is expected to generate 69.81 times less return on investment than Urban Outfitters. But when comparing it to its historical volatility, Ross Stores is 2.05 times less risky than Urban Outfitters. It trades about 0.01 of its potential returns per unit of risk. Urban Outfitters is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,178  in Urban Outfitters on May 7, 2025 and sell it today you would earn a total of  2,736  from holding Urban Outfitters or generate 52.84% return on investment over 90 days.

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

Ross Stores  vs.  Urban Outfitters

Ross Stores

Risk-Adjusted Performance

Weakest

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Urban Outfitters

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, Urban Outfitters displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ross Stores and Urban Outfitters

The main advantage of trading using opposite Ross Stores and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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' long position.

The idea behind Ross Stores 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.