Correlation Between Ross Stores and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Emerson Radio 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 Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Emerson Radio, you can compare the effects of market volatilities on Ross Stores and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Emerson Radio.
Diversification Opportunities for Ross Stores and Emerson Radio
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ross and Emerson is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Ross Stores i.e., Ross Stores and Emerson Radio go up and down completely randomly.
Pair Corralation between Ross Stores and Emerson Radio
Given the investment horizon of 90 days Ross Stores is expected to generate 0.4 times more return on investment than Emerson Radio. However, Ross Stores is 2.52 times less risky than Emerson Radio. It trades about 0.08 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.03 per unit of risk. If you would invest 13,182 in Ross Stores on September 3, 2024 and sell it today you would earn a total of 2,305 from holding Ross Stores or generate 17.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Emerson Radio
Performance |
| Timeline |
| Ross Stores |
| Emerson Radio |
Ross Stores and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Emerson Radio
The main advantage of trading using opposite Ross Stores and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio'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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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