Correlation Between Global E and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Global E 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 Global E and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and Ross Stores, you can compare the effects of market volatilities on Global E 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 Global E with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Ross Stores.
Diversification Opportunities for Global E and Ross Stores
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Global and Ross is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Global E 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 Global E Online 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 Global E i.e., Global E and Ross Stores go up and down completely randomly.
Pair Corralation between Global E and Ross Stores
Given the investment horizon of 90 days Global E Online is expected to generate 2.57 times more return on investment than Ross Stores. However, Global E is 2.57 times more volatile than Ross Stores. It trades about 0.07 of its potential returns per unit of risk. Ross Stores is currently generating about 0.04 per unit of risk. If you would invest 2,233 in Global E Online on August 27, 2024 and sell it today you would earn a total of 2,756 from holding Global E Online or generate 123.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Online vs. Ross Stores
Performance |
| Timeline |
| Global E Online |
| Ross Stores |
Global E and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global E and Ross Stores
The main advantage of trading using opposite Global E and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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.The idea behind Global E Online and Ross Stores 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.| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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