Correlation Between New Residential and Ross Stores
Can any of the company-specific risk be diversified away by investing in both New Residential 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 New Residential and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Ross Stores, you can compare the effects of market volatilities on New Residential 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 New Residential with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Ross Stores.
Diversification Opportunities for New Residential and Ross Stores
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Ross is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and New Residential 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 New Residential Investment 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 New Residential i.e., New Residential and Ross Stores go up and down completely randomly.
Pair Corralation between New Residential and Ross Stores
Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.56 times more return on investment than Ross Stores. However, New Residential is 1.56 times more volatile than Ross Stores. It trades about 0.05 of its potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of risk. If you would invest 733.00 in New Residential Investment on September 4, 2024 and sell it today you would earn a total of 390.00 from holding New Residential Investment or generate 53.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.59% |
| Values | Daily Returns |
New Residential Investment vs. Ross Stores
Performance |
| Timeline |
| New Residential Inve |
| Ross Stores |
New Residential and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Ross Stores
The main advantage of trading using opposite New Residential and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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.| New Residential vs. Samsung Electronics Co | New Residential vs. Samsung Electronics Co | New Residential vs. Hyundai Motor | New Residential vs. Toyota Motor Corp |
| Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Hyundai Motor | Ross Stores vs. Toyota Motor Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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