Correlation Between Ross Stores and Capital One
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Capital One 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 Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Capital One Financial, you can compare the effects of market volatilities on Ross Stores and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Capital One.
Diversification Opportunities for Ross Stores and Capital One
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ross and Capital is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Ross Stores i.e., Ross Stores and Capital One go up and down completely randomly.
Pair Corralation between Ross Stores and Capital One
Assuming the 90 days trading horizon Ross Stores is expected to under-perform the Capital One. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 2.09 times less risky than Capital One. The stock trades about -0.21 of its potential returns per unit of risk. The Capital One Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 56,772 in Capital One Financial on November 4, 2024 and sell it today you would earn a total of 3,131 from holding Capital One Financial or generate 5.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Capital One Financial
Performance |
| Timeline |
| Ross Stores |
| Capital One Financial |
Ross Stores and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Capital One
The main advantage of trading using opposite Ross Stores and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Ross Stores vs. Iron Mountain Incorporated | Ross Stores vs. Pentair plc | Ross Stores vs. Live Nation Entertainment, | Ross Stores vs. Annaly Capital Management, |
| Capital One vs. Align Technology | Capital One vs. Cognizant Technology Solutions | Capital One vs. Zebra Technologies | Capital One vs. METISA Metalrgica Timboense |
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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