Correlation Between Ross Stores and NOW

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

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

Diversification Opportunities for Ross Stores and NOW

0.0

Correlation Coefficient

Ross Stores  NOW

Pay attention - limited upside

The 3 months correlation between Ross and NOW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and NOW Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOW Inc and Ross Stores 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 Ross Stores are associated (or correlated) with NOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOW Inc has no effect on the direction of Ross Stores i.e., Ross Stores and NOW go up and down completely randomly.

Pair Corralation between Ross Stores and NOW

If you would invest  288,967  in Ross Stores on October 22, 2024 and sell it today you would earn a total of  24,433  from holding Ross Stores or generate 8.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	30.0%
Values	Daily Returns

Ross Stores  vs.  NOW Inc

Ross Stores

Risk-Adjusted Performance

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Solid

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Ross Stores showed solid returns over the last few months and may actually be approaching a breakup point.

NOW Inc

Risk-Adjusted Performance

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Very Weak

Over the last 90 days NOW Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, NOW is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ross Stores and NOW

The main advantage of trading using opposite Ross Stores and NOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, NOW 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 NOW will offset losses from the drop in NOW's long position.

The idea behind Ross Stores and NOW Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.