Correlation Between Ross Stores and South32

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Can any of the company-specific risk be diversified away by investing in both Ross Stores and South32 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 South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and South32, you can compare the effects of market volatilities on Ross Stores and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and South32.

Diversification Opportunities for Ross Stores and South32

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ross and South32 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Ross Stores i.e., Ross Stores and South32 go up and down completely randomly.

Pair Corralation between Ross Stores and South32

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.83 times more return on investment than South32. However, Ross Stores is 1.2 times less risky than South32. It trades about 0.3 of its potential returns per unit of risk. South32 is currently generating about -0.2 per unit of risk. If you would invest  14,167  in Ross Stores on September 8, 2024 and sell it today you would earn a total of  1,605  from holding Ross Stores or generate 11.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ross Stores  vs.  South32

 Performance 
       Timeline  
Ross Stores 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
South32 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in South32 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, South32 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ross Stores and South32 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ross Stores and South32

The main advantage of trading using opposite Ross Stores and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.
The idea behind Ross Stores and South32 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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