Correlation Between Adriatic Metals and Ross Stores

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

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

Diversification Opportunities for Adriatic Metals and Ross Stores

-0.69

Correlation Coefficient

Adriatic Metals  Ross Stores

Excellent diversification

The 3 months correlation between Adriatic and Ross is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Adriatic Metals 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 Adriatic Metals 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 Adriatic Metals i.e., Adriatic Metals and Ross Stores go up and down completely randomly.

Pair Corralation between Adriatic Metals and Ross Stores

Assuming the 90 days trading horizon Adriatic Metals is expected to generate 1.81 times more return on investment than Ross Stores. However, Adriatic Metals is 1.81 times more volatile than Ross Stores. It trades about 0.08 of its potential returns per unit of risk. Ross Stores is currently generating about -0.19 per unit of risk. If you would invest  19,620  in Adriatic Metals on December 22, 2024 and sell it today you would earn a total of  1,980  from holding Adriatic Metals or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Adriatic Metals  vs.  Ross Stores

Adriatic Metals

Risk-Adjusted Performance

Modest

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

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Adriatic Metals and Ross Stores

The main advantage of trading using opposite Adriatic Metals and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals 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.

The idea behind Adriatic Metals and Ross Stores 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 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.