Correlation Between Ross Stores and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Advance Auto 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 Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Advance Auto Parts, you can compare the effects of market volatilities on Ross Stores and Advance Auto 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 Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Advance Auto.
Diversification Opportunities for Ross Stores and Advance Auto
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ross and Advance is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Ross Stores i.e., Ross Stores and Advance Auto go up and down completely randomly.
Pair Corralation between Ross Stores and Advance Auto
Assuming the 90 days trading horizon Ross Stores is expected to generate 0.46 times more return on investment than Advance Auto. However, Ross Stores is 2.16 times less risky than Advance Auto. It trades about 0.08 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.03 per unit of risk. If you would invest 38,803 in Ross Stores on November 3, 2024 and sell it today you would earn a total of 5,274 from holding Ross Stores or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Advance Auto Parts
Performance |
| Timeline |
| Ross Stores |
| Advance Auto Parts |
Ross Stores and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Advance Auto
The main advantage of trading using opposite Ross Stores and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Ross Stores vs. Synchrony Financial | Ross Stores vs. Discover Financial Services | Ross Stores vs. Prudential Financial | Ross Stores vs. DENTSPLY SIRONA |
| Advance Auto vs. Tyson Foods | Advance Auto vs. Zoom Video Communications | Advance Auto vs. Raytheon Technologies | Advance Auto vs. Verizon Communications |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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