Correlation Between ABC MartInc and Ross Stores

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

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

Diversification Opportunities for ABC MartInc and Ross Stores

0.0

Correlation Coefficient

ABC MartInc  Ross Stores

Pay attention - limited upside

The 3 months correlation between ABC and Ross is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ABC MartInc and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and ABC MartInc 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 ABC MartInc 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 ABC MartInc i.e., ABC MartInc and Ross Stores go up and down completely randomly.

Pair Corralation between ABC MartInc and Ross Stores

If you would invest  5,943  in ABC MartInc on September 25, 2024 and sell it today you would earn a total of  0.00  from holding ABC MartInc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

ABC MartInc  vs.  Ross Stores

ABC MartInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC MartInc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ABC MartInc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ross Stores

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ABC MartInc and Ross Stores

The main advantage of trading using opposite ABC MartInc and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC MartInc 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 ABC MartInc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.