Correlation Between Phibro Animal and Ross Stores

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

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

Diversification Opportunities for Phibro Animal and Ross Stores

0.18

Correlation Coefficient

Phibro Animal  Ross Stores

Average diversification

The 3 months correlation between Phibro and Ross is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Phibro Animal 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 Phibro Animal Health 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 Phibro Animal i.e., Phibro Animal and Ross Stores go up and down completely randomly.

Pair Corralation between Phibro Animal and Ross Stores

Assuming the 90 days horizon Phibro Animal Health is expected to generate 2.0 times more return on investment than Ross Stores. However, Phibro Animal is 2.0 times more volatile than Ross Stores. It trades about 0.04 of its potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of risk. If you would invest  1,288  in Phibro Animal Health on October 11, 2024 and sell it today you would earn a total of  672.00  from holding Phibro Animal Health or generate 52.17% return on investment over 90 days.

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

Phibro Animal Health  vs.  Ross Stores

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Phibro Animal 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 8 (%) 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 Phibro Animal and Ross Stores

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

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.