Correlation Between Gap, and Ross Stores

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

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

Diversification Opportunities for Gap, and Ross Stores

0.03

Correlation Coefficient

Gap,  Ross Stores

Significant diversification

The 3 months correlation between Gap, and Ross is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Ross Stores go up and down completely randomly.

Pair Corralation between Gap, and Ross Stores

Considering the 90-day investment horizon The Gap, is expected to generate 2.64 times more return on investment than Ross Stores. However, Gap, is 2.64 times more volatile than Ross Stores. It trades about 0.05 of its potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of risk. If you would invest  1,281  in The Gap, on August 31, 2024 and sell it today you would earn a total of  1,141  from holding The Gap, or generate 89.07% return on investment over 90 days.

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

The Gap,  vs.  Ross Stores

Gap,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ross Stores

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 2 (%) 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 Gap, and Ross Stores

The main advantage of trading using opposite Gap, and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .