Correlation Between Ross Stores and EBay
Can any of the company-specific risk be diversified away by investing in both Ross Stores and EBay 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 EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and eBay Inc, you can compare the effects of market volatilities on Ross Stores and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and EBay.
Diversification Opportunities for Ross Stores and EBay
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ross and EBay is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Ross Stores i.e., Ross Stores and EBay go up and down completely randomly.
Pair Corralation between Ross Stores and EBay
Assuming the 90 days trading horizon Ross Stores is expected to generate 1.2 times more return on investment than EBay. However, Ross Stores is 1.2 times more volatile than eBay Inc. It trades about 0.52 of its potential returns per unit of risk. eBay Inc is currently generating about 0.05 per unit of risk. If you would invest 287,967 in Ross Stores on September 13, 2024 and sell it today you would earn a total of 29,696 from holding Ross Stores or generate 10.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 40.91% |
| Values | Daily Returns |
Ross Stores vs. eBay Inc
Performance |
| Timeline |
| Ross Stores |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| eBay Inc |
Ross Stores and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and EBay
The main advantage of trading using opposite Ross Stores and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| Ross Stores vs. First Republic Bank | Ross Stores vs. Southern Copper | Ross Stores vs. Capital One Financial | Ross Stores vs. Southwest Airlines |
| EBay vs. GMxico Transportes SAB | EBay vs. Genworth Financial | EBay vs. Applied Materials | EBay vs. Grupo Sports World |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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