Correlation Between Ross Stores and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Ross Stores and BAE Systems 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 BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and BAE Systems plc, you can compare the effects of market volatilities on Ross Stores and BAE Systems 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 BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and BAE Systems.
Diversification Opportunities for Ross Stores and BAE Systems
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ross and BAE is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and BAE Systems plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems plc 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 BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems plc has no effect on the direction of Ross Stores i.e., Ross Stores and BAE Systems go up and down completely randomly.
Pair Corralation between Ross Stores and BAE Systems
Assuming the 90 days trading horizon Ross Stores is expected to generate 5.17 times less return on investment than BAE Systems. But when comparing it to its historical volatility, Ross Stores is 1.1 times less risky than BAE Systems. It trades about 0.02 of its potential returns per unit of risk. BAE Systems plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 123,085 in BAE Systems plc on August 27, 2024 and sell it today you would earn a total of 6,665 from holding BAE Systems plc or generate 5.41% 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. BAE Systems plc
Performance |
| Timeline |
| Ross Stores |
| BAE Systems plc |
Ross Stores and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and BAE Systems
The main advantage of trading using opposite Ross Stores and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.| Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Hyundai Motor | Ross Stores vs. Toyota Motor Corp |
| BAE Systems vs. Automatic Data Processing | BAE Systems vs. Zoom Video Communications | BAE Systems vs. Gamma Communications PLC | BAE Systems vs. Ross Stores |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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