Correlation Between Kaiser Aluminum and Ross Stores

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

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

Diversification Opportunities for Kaiser Aluminum and Ross Stores

0.37

Correlation Coefficient

Kaiser Aluminum  Ross Stores

Weak diversification

The 3 months correlation between Kaiser and Ross is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Ross Stores go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Ross Stores

Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 4.6 times less return on investment than Ross Stores. In addition to that, Kaiser Aluminum is 1.87 times more volatile than Ross Stores. It trades about 0.01 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of volatility. If you would invest  10,698  in Ross Stores on October 9, 2024 and sell it today you would earn a total of  4,254  from holding Ross Stores or generate 39.76% return on investment over 90 days.

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

Kaiser Aluminum  vs.  Ross Stores

Kaiser Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ross Stores

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ross Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaiser Aluminum and Ross Stores

The main advantage of trading using opposite Kaiser Aluminum and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.