Correlation Between Ross Stores and Vanguard World

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

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

Diversification Opportunities for Ross Stores and Vanguard World

-0.47

Correlation Coefficient

Ross Stores  Vanguard World

Very good diversification

The 3 months correlation between Ross and Vanguard is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World 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 Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Ross Stores i.e., Ross Stores and Vanguard World go up and down completely randomly.

Pair Corralation between Ross Stores and Vanguard World

Assuming the 90 days trading horizon Ross Stores is expected to generate 2.92 times more return on investment than Vanguard World. However, Ross Stores is 2.92 times more volatile than Vanguard World. It trades about 0.14 of its potential returns per unit of risk. Vanguard World is currently generating about 0.08 per unit of risk. If you would invest  247,093  in Ross Stores on October 7, 2024 and sell it today you would earn a total of  66,307  from holding Ross Stores or generate 26.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.76%
Values	Daily Returns

Ross Stores  vs.  Vanguard World

Ross Stores

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Ross Stores showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ross Stores and Vanguard World

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

The idea behind Ross Stores and Vanguard World 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.