Correlation Between Ross Stores and H FARM

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

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

Diversification Opportunities for Ross Stores and H FARM

-0.58

Correlation Coefficient

Ross Stores  H FARM

Excellent diversification

The 3 months correlation between Ross and 5JQ is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and H FARM SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H FARM SPA 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 H FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H FARM SPA has no effect on the direction of Ross Stores i.e., Ross Stores and H FARM go up and down completely randomly.

Pair Corralation between Ross Stores and H FARM

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.41 times more return on investment than H FARM. However, Ross Stores is 2.41 times less risky than H FARM. It trades about 0.09 of its potential returns per unit of risk. H FARM SPA is currently generating about -0.01 per unit of risk. If you would invest  13,484  in Ross Stores on September 17, 2024 and sell it today you would earn a total of  1,238  from holding Ross Stores or generate 9.18% return on investment over 90 days.

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

Ross Stores  vs.  H FARM SPA

Ross Stores

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H FARM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ross Stores and H FARM

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

The idea behind Ross Stores and H FARM SPA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.