Correlation Between Industria and Ross Stores

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

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

Diversification Opportunities for Industria and Ross Stores

0.19

Correlation Coefficient

Industria  Ross Stores

Average diversification

The 3 months correlation between Industria and Ross is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Industria 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 Industria de Diseno 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 Industria i.e., Industria and Ross Stores go up and down completely randomly.

Pair Corralation between Industria and Ross Stores

Assuming the 90 days horizon Industria de Diseno is expected to under-perform the Ross Stores. In addition to that, Industria is 1.01 times more volatile than Ross Stores. It trades about -0.02 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.0 per unit of volatility. If you would invest  15,488  in Ross Stores on September 13, 2024 and sell it today you would lose (104.00) from holding Ross Stores or give up 0.67% of portfolio value over 90 days.

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

Industria de Diseno  vs.  Ross Stores

Industria de Diseno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ross Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Industria and Ross Stores

The main advantage of trading using opposite Industria and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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 Industria de Diseno 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.