Correlation Between Ross Stores and Financiera Independencia

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

By analyzing existing cross correlation between Ross Stores and Financiera Independencia SAB, you can compare the effects of market volatilities on Ross Stores and Financiera Independencia 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 Financiera Independencia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Financiera Independencia.

Diversification Opportunities for Ross Stores and Financiera Independencia

-0.64

Correlation Coefficient

Ross Stores  Financiera Independencia

Excellent diversification

The 3 months correlation between Ross and Financiera is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Financiera Independencia SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financiera Independencia 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 Financiera Independencia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financiera Independencia has no effect on the direction of Ross Stores i.e., Ross Stores and Financiera Independencia go up and down completely randomly.

Pair Corralation between Ross Stores and Financiera Independencia

Assuming the 90 days trading horizon Ross Stores is expected to generate 1.85 times more return on investment than Financiera Independencia. However, Ross Stores is 1.85 times more volatile than Financiera Independencia SAB. It trades about 0.08 of its potential returns per unit of risk. Financiera Independencia SAB is currently generating about -0.16 per unit of risk. If you would invest  301,000  in Ross Stores on August 31, 2024 and sell it today you would earn a total of  11,485  from holding Ross Stores or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	36.07%
Values	Daily Returns

Ross Stores  vs.  Financiera Independencia SAB

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 fairly weak basic indicators, Ross Stores showed solid returns over the last few months and may actually be approaching a breakup point.

Financiera Independencia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financiera Independencia SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ross Stores and Financiera Independencia

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

The idea behind Ross Stores and Financiera Independencia SAB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.