Correlation Between HE Equipment and Ross Stores
Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Ross Stores, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Ross Stores.
Diversification Opportunities for HE Equipment and Ross Stores
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HEES and Ross is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Ross Stores go up and down completely randomly.
Pair Corralation between HE Equipment and Ross Stores
Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Ross Stores. In addition to that, HE Equipment is 1.97 times more volatile than Ross Stores. It trades about -0.01 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of volatility. If you would invest 13,957 in Ross Stores on September 4, 2024 and sell it today you would earn a total of 1,679 from holding Ross Stores or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Ross Stores
Performance |
| Timeline |
| HE Equipment Services |
| Ross Stores |
HE Equipment and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Ross Stores
The main advantage of trading using opposite HE Equipment and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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