Correlation Between Prestige Consumer and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Prestige Consumer 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 Prestige Consumer and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prestige Consumer Healthcare and Ross Stores, you can compare the effects of market volatilities on Prestige Consumer 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 Prestige Consumer with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prestige Consumer and Ross Stores.
Diversification Opportunities for Prestige Consumer and Ross Stores
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prestige and Ross is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Consumer Healthcare and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Prestige Consumer 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 Prestige Consumer Healthcare 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 Prestige Consumer i.e., Prestige Consumer and Ross Stores go up and down completely randomly.
Pair Corralation between Prestige Consumer and Ross Stores
Assuming the 90 days horizon Prestige Consumer Healthcare is expected to under-perform the Ross Stores. But the stock apears to be less risky and, when comparing its historical volatility, Prestige Consumer Healthcare is 1.61 times less risky than Ross Stores. The stock trades about -0.75 of its potential returns per unit of risk. The Ross Stores is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 14,682 in Ross Stores on October 12, 2024 and sell it today you would earn a total of 260.00 from holding Ross Stores or generate 1.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 94.44% |
Values | Daily Returns |
Prestige Consumer Healthcare vs. Ross Stores
Performance |
Timeline |
Prestige Consumer |
Ross Stores |
Prestige Consumer and Ross Stores Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prestige Consumer and Ross Stores
The main advantage of trading using opposite Prestige Consumer and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prestige Consumer 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.Prestige Consumer vs. United Insurance Holdings | Prestige Consumer vs. Goosehead Insurance | Prestige Consumer vs. REVO INSURANCE SPA | Prestige Consumer vs. Shenandoah Telecommunications |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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