Correlation Between Ross Stores and Volkswagen

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

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

Diversification Opportunities for Ross Stores and Volkswagen

-0.34

Correlation Coefficient

Ross Stores  Volkswagen

Very good diversification

The 3 months correlation between Ross and Volkswagen is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Volkswagen AG Non Vtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Non 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG Non has no effect on the direction of Ross Stores i.e., Ross Stores and Volkswagen go up and down completely randomly.

Pair Corralation between Ross Stores and Volkswagen

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.88 times more return on investment than Volkswagen. However, Ross Stores is 1.13 times less risky than Volkswagen. It trades about 0.11 of its potential returns per unit of risk. Volkswagen AG Non Vtg is currently generating about -0.07 per unit of risk. If you would invest  13,985  in Ross Stores on October 7, 2024 and sell it today you would earn a total of  1,358  from holding Ross Stores or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ross Stores  vs.  Volkswagen AG Non Vtg

Ross Stores

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Volkswagen AG Non

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG Non Vtg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 Volkswagen

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

The idea behind Ross Stores and Volkswagen AG Non Vtg 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.