Correlation Between Global Fashion and Ross Stores

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

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

Diversification Opportunities for Global Fashion and Ross Stores

-0.31

Correlation Coefficient

Global Fashion  Ross Stores

Very good diversification

The 3 months correlation between Global and Ross is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Global Fashion Group and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Global Fashion 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 Global Fashion Group 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 Global Fashion i.e., Global Fashion and Ross Stores go up and down completely randomly.

Pair Corralation between Global Fashion and Ross Stores

Assuming the 90 days trading horizon Global Fashion Group is expected to generate 3.13 times more return on investment than Ross Stores. However, Global Fashion is 3.13 times more volatile than Ross Stores. It trades about 0.05 of its potential returns per unit of risk. Ross Stores is currently generating about 0.07 per unit of risk. If you would invest  22.00  in Global Fashion Group on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Global Fashion Group or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Global Fashion Group  vs.  Ross Stores

Global Fashion Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Fashion Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Global Fashion 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. Despite nearly fragile basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global Fashion and Ross Stores

The main advantage of trading using opposite Global Fashion and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fashion 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 Global Fashion Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.