Correlation Between Ross Stores and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Hooker Furniture 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 Hooker Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Hooker Furniture, you can compare the effects of market volatilities on Ross Stores and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Hooker Furniture.
Diversification Opportunities for Ross Stores and Hooker Furniture
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ross and Hooker is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Ross Stores i.e., Ross Stores and Hooker Furniture go up and down completely randomly.
Pair Corralation between Ross Stores and Hooker Furniture
Given the investment horizon of 90 days Ross Stores is expected to generate 0.5 times more return on investment than Hooker Furniture. However, Ross Stores is 2.0 times less risky than Hooker Furniture. It trades about 0.06 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.02 per unit of risk. If you would invest 11,152 in Ross Stores on September 5, 2024 and sell it today you would earn a total of 4,220 from holding Ross Stores or generate 37.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Hooker Furniture
Performance |
| Timeline |
| Ross Stores |
| Hooker Furniture |
Ross Stores and Hooker Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Hooker Furniture
The main advantage of trading using opposite Ross Stores and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Natuzzi SpA | Hooker Furniture vs. Flexsteel Industries | Hooker Furniture vs. Hamilton Beach Brands |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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