Correlation Between Ross Stores and Aritzia

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

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

Diversification Opportunities for Ross Stores and Aritzia

0.43

Correlation Coefficient

Ross Stores  Aritzia

Very weak diversification

The 3 months correlation between Ross and Aritzia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia 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 Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Ross Stores i.e., Ross Stores and Aritzia go up and down completely randomly.

Pair Corralation between Ross Stores and Aritzia

Given the investment horizon of 90 days Ross Stores is expected to generate 1.26 times less return on investment than Aritzia. But when comparing it to its historical volatility, Ross Stores is 2.61 times less risky than Aritzia. It trades about 0.05 of its potential returns per unit of risk. Aritzia is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,400  in Aritzia on September 24, 2024 and sell it today you would earn a total of  365.00  from holding Aritzia or generate 10.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Ross Stores  vs.  Aritzia

Ross Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aritzia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aritzia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ross Stores and Aritzia

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

The idea behind Ross Stores and Aritzia 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.