Correlation Between Apple and Ross Stores

Can any of the company-specific risk be diversified away by investing in both Apple and Ross Stores 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 Apple and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and Ross Stores, you can compare the effects of market volatilities on Apple and Ross Stores 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 Apple with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Ross Stores.

Diversification Opportunities for Apple and Ross Stores

0.66

Correlation Coefficient

Apple  Ross Stores

Poor diversification

The 3 months correlation between Apple and Ross is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Apple 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 Apple Inc are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Apple i.e., Apple and Ross Stores go up and down completely randomly.

Pair Corralation between Apple and Ross Stores

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.7 times more return on investment than Ross Stores. However, Apple Inc is 1.43 times less risky than Ross Stores. It trades about 0.2 of its potential returns per unit of risk. Ross Stores is currently generating about 0.07 per unit of risk. If you would invest  20,116  in Apple Inc on September 12, 2024 and sell it today you would earn a total of  3,409  from holding Apple Inc or generate 16.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Ross Stores

Apple Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ross Stores

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Ross Stores

The main advantage of trading using opposite Apple and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.

The idea behind Apple Inc and Ross Stores pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.