Correlation Between Capri Holdings and Ross Stores

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

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

Diversification Opportunities for Capri Holdings and Ross Stores

-0.02

Correlation Coefficient

Capri Holdings  Ross Stores

Good diversification

The 3 months correlation between Capri and Ross is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Capri Holdings 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 Capri Holdings 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 Capri Holdings i.e., Capri Holdings and Ross Stores go up and down completely randomly.

Pair Corralation between Capri Holdings and Ross Stores

Given the investment horizon of 90 days Capri Holdings is expected to generate 2.84 times more return on investment than Ross Stores. However, Capri Holdings is 2.84 times more volatile than Ross Stores. It trades about 0.21 of its potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of risk. If you would invest  2,098  in Capri Holdings on October 20, 2024 and sell it today you would earn a total of  284.00  from holding Capri Holdings or generate 13.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Capri Holdings  vs.  Ross Stores

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ross Stores

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Capri Holdings and Ross Stores

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