Correlation Between Ross Stores and Lupatech

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

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

Diversification Opportunities for Ross Stores and Lupatech

-0.46

Correlation Coefficient

Ross Stores  Lupatech

Very good diversification

The 3 months correlation between Ross and Lupatech is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Lupatech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lupatech SA 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 Lupatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lupatech SA has no effect on the direction of Ross Stores i.e., Ross Stores and Lupatech go up and down completely randomly.

Pair Corralation between Ross Stores and Lupatech

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.49 times more return on investment than Lupatech. However, Ross Stores is 2.03 times less risky than Lupatech. It trades about 0.11 of its potential returns per unit of risk. Lupatech SA is currently generating about -0.05 per unit of risk. If you would invest  32,640  in Ross Stores on September 12, 2024 and sell it today you would earn a total of  14,228  from holding Ross Stores or generate 43.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.77%
Values	Daily Returns

Ross Stores  vs.  Lupatech SA

Ross Stores

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ross Stores and Lupatech

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

The idea behind Ross Stores and Lupatech SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.