Correlation Between Ross Stores and AstraZeneca PLC

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

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

Diversification Opportunities for Ross Stores and AstraZeneca PLC

0.11

Correlation Coefficient

Ross Stores  AstraZeneca PLC

Average diversification

The 3 months correlation between Ross and AstraZeneca is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Ross Stores i.e., Ross Stores and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Ross Stores and AstraZeneca PLC

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.99 times more return on investment than AstraZeneca PLC. However, Ross Stores is 1.01 times less risky than AstraZeneca PLC. It trades about 0.05 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.02 per unit of risk. If you would invest  11,379  in Ross Stores on October 26, 2024 and sell it today you would earn a total of  3,559  from holding Ross Stores or generate 31.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.19%
Values	Daily Returns

Ross Stores  vs.  AstraZeneca PLC

Ross Stores

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AstraZeneca PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ross Stores and AstraZeneca PLC

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

The idea behind Ross Stores and AstraZeneca PLC 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.