Correlation Between Ross Stores and Acco Brands

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

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

Diversification Opportunities for Ross Stores and Acco Brands

0.27

Correlation Coefficient

Ross Stores  Acco Brands

Modest diversification

The 3 months correlation between Ross and Acco is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands 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 Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Ross Stores i.e., Ross Stores and Acco Brands go up and down completely randomly.

Pair Corralation between Ross Stores and Acco Brands

Given the investment horizon of 90 days Ross Stores is expected to generate 0.57 times more return on investment than Acco Brands. However, Ross Stores is 1.77 times less risky than Acco Brands. It trades about 0.05 of its potential returns per unit of risk. Acco Brands is currently generating about 0.02 per unit of risk. If you would invest  11,359  in Ross Stores on September 20, 2024 and sell it today you would earn a total of  3,726  from holding Ross Stores or generate 32.8% 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.  Acco Brands

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Acco Brands

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Acco Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ross Stores and Acco Brands

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

The idea behind Ross Stores and Acco Brands 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.