Correlation Between Ross Stores and Grocery Outlet
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Grocery Outlet 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 Grocery Outlet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Grocery Outlet Holding, you can compare the effects of market volatilities on Ross Stores and Grocery Outlet 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 Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Grocery Outlet.
Diversification Opportunities for Ross Stores and Grocery Outlet
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ross and Grocery is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of Ross Stores i.e., Ross Stores and Grocery Outlet go up and down completely randomly.
Pair Corralation between Ross Stores and Grocery Outlet
Given the investment horizon of 90 days Ross Stores is expected to generate 0.44 times more return on investment than Grocery Outlet. However, Ross Stores is 2.26 times less risky than Grocery Outlet. It trades about 0.07 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about 0.01 per unit of risk. If you would invest 13,907 in Ross Stores on August 29, 2024 and sell it today you would earn a total of 1,531 from holding Ross Stores or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Grocery Outlet Holding
Performance |
| Timeline |
| Ross Stores |
| Grocery Outlet Holding |
Ross Stores and Grocery Outlet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Grocery Outlet
The main advantage of trading using opposite Ross Stores and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Grocery Outlet 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 Grocery Outlet will offset losses from the drop in Grocery Outlet's long position.| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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