Correlation Between Auto Trader and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Ross Stores 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 Auto Trader and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Ross Stores, you can compare the effects of market volatilities on Auto Trader and Ross Stores 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 Auto Trader with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Ross Stores.
Diversification Opportunities for Auto Trader and Ross Stores
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Ross is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Auto Trader 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 Auto Trader Group are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Auto Trader i.e., Auto Trader and Ross Stores go up and down completely randomly.
Pair Corralation between Auto Trader and Ross Stores
Assuming the 90 days trading horizon Auto Trader is expected to generate 2.13 times less return on investment than Ross Stores. But when comparing it to its historical volatility, Auto Trader Group is 1.3 times less risky than Ross Stores. It trades about 0.03 of its potential returns per unit of risk. Ross Stores is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,294 in Ross Stores on September 5, 2024 and sell it today you would earn a total of 1,472 from holding Ross Stores or generate 11.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Auto Trader Group vs. Ross Stores
Performance |
Timeline |
Auto Trader Group |
Ross Stores |
Auto Trader and Ross Stores Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Auto Trader and Ross Stores
The main advantage of trading using opposite Auto Trader and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc |
Ross Stores vs. TOTAL GABON | Ross Stores vs. Walgreens Boots Alliance | Ross Stores vs. Peak Resources Limited |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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