Correlation Between Urban Outfitters and Guess

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

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

Diversification Opportunities for Urban Outfitters and Guess

0.55

Correlation Coefficient

Urban Outfitters  Guess

Very weak diversification

The 3 months correlation between Urban and Guess is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess 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 Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Urban Outfitters i.e., Urban Outfitters and Guess go up and down completely randomly.

Pair Corralation between Urban Outfitters and Guess

Given the investment horizon of 90 days Urban Outfitters is expected to generate 1.39 times more return on investment than Guess. However, Urban Outfitters is 1.39 times more volatile than Guess Inc. It trades about 0.2 of its potential returns per unit of risk. Guess Inc is currently generating about 0.12 per unit of risk. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Urban Outfitters  vs.  Guess Inc

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.

Guess Inc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Guess Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Guess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Urban Outfitters and Guess

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

The idea behind Urban Outfitters and Guess 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.