Correlation Between Overstock and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Overstock 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 Overstock and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overstock and Ross Stores, you can compare the effects of market volatilities on Overstock 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 Overstock with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overstock and Ross Stores.
Diversification Opportunities for Overstock and Ross Stores
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Overstock and Ross is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Overstock and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Overstock 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 Overstock 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 Overstock i.e., Overstock and Ross Stores go up and down completely randomly.
Pair Corralation between Overstock and Ross Stores
Assuming the 90 days trading horizon Overstock is expected to under-perform the Ross Stores. In addition to that, Overstock is 1.66 times more volatile than Ross Stores. It trades about -0.15 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.17 per unit of volatility. If you would invest 14,397 in Ross Stores on August 28, 2024 and sell it today you would earn a total of 973.00 from holding Ross Stores or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Overstock vs. Ross Stores
Performance |
| Timeline |
| Overstock |
| Ross Stores |
Overstock and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Overstock and Ross Stores
The main advantage of trading using opposite Overstock and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overstock 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.| Overstock vs. Kaufman Et Broad | Overstock vs. Host Hotels Resorts | Overstock vs. Broadridge Financial Solutions | Overstock vs. Telecom Italia SpA |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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