Correlation Between British American and Ross Stores
Can any of the company-specific risk be diversified away by investing in both British American and Ross Stores 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 British American and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Ross Stores, you can compare the effects of market volatilities on British American and Ross Stores 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 British American with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Ross Stores.
Diversification Opportunities for British American and Ross Stores
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Ross is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and British American 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 British American Tobacco are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of British American i.e., British American and Ross Stores go up and down completely randomly.
Pair Corralation between British American and Ross Stores
Assuming the 90 days trading horizon British American is expected to generate 1.35 times less return on investment than Ross Stores. In addition to that, British American is 1.74 times more volatile than Ross Stores. It trades about 0.02 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of volatility. If you would invest 11,838 in Ross Stores on August 31, 2024 and sell it today you would earn a total of 3,710 from holding Ross Stores or generate 31.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.71% |
| Values | Daily Returns |
British American Tobacco vs. Ross Stores
Performance |
| Timeline |
| British American Tobacco |
| Ross Stores |
British American and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Ross Stores
The main advantage of trading using opposite British American and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| British American vs. Neometals | British American vs. Coor Service Management | British American vs. Aeorema Communications Plc | British American vs. JLEN Environmental Assets |
| Ross Stores vs. Centaur Media | Ross Stores vs. Everyman Media Group | Ross Stores vs. bet at home AG | Ross Stores vs. MediaZest plc |
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 the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |