Correlation Between Ross Stores and United Airlines
Can any of the company-specific risk be diversified away by investing in both Ross Stores and United Airlines 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 United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and United Airlines Holdings, you can compare the effects of market volatilities on Ross Stores and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and United Airlines.
Diversification Opportunities for Ross Stores and United Airlines
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ross and United is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Ross Stores i.e., Ross Stores and United Airlines go up and down completely randomly.
Pair Corralation between Ross Stores and United Airlines
Assuming the 90 days trading horizon Ross Stores is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 3.21 times less risky than United Airlines. The stock trades about -0.21 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 30,122 in United Airlines Holdings on November 7, 2024 and sell it today you would earn a total of 1,144 from holding United Airlines Holdings or generate 3.8% 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. United Airlines Holdings
Performance |
| Timeline |
| Ross Stores |
| United Airlines Holdings |
Ross Stores and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and United Airlines
The main advantage of trading using opposite Ross Stores and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Ross Stores vs. Apartment Investment and | Ross Stores vs. Cognizant Technology Solutions | Ross Stores vs. SK Telecom Co, | Ross Stores vs. G2D Investments |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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