Correlation Between Ross Stores and Reliance Industries

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

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

Diversification Opportunities for Ross Stores and Reliance Industries

-0.31

Correlation Coefficient

Ross Stores  Reliance Industries

Very good diversification

The 3 months correlation between Ross and Reliance is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Reliance Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries 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 Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Ross Stores i.e., Ross Stores and Reliance Industries go up and down completely randomly.

Pair Corralation between Ross Stores and Reliance Industries

Assuming the 90 days trading horizon Ross Stores is expected to generate 1.14 times more return on investment than Reliance Industries. However, Ross Stores is 1.14 times more volatile than Reliance Industries Ltd. It trades about -0.02 of its potential returns per unit of risk. Reliance Industries Ltd is currently generating about -0.28 per unit of risk. If you would invest  15,452  in Ross Stores on October 5, 2024 and sell it today you would lose (109.00) from holding Ross Stores or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ross Stores  vs.  Reliance Industries Ltd

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 uncertain basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd 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 Reliance Industries

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

The idea behind Ross Stores and Reliance Industries Ltd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.