Correlation Between Ross Stores and Civitas Resources

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

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

Diversification Opportunities for Ross Stores and Civitas Resources

-0.34

Correlation Coefficient

Ross Stores  Civitas Resources

Very good diversification

The 3 months correlation between Ross and Civitas is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources 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 Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of Ross Stores i.e., Ross Stores and Civitas Resources go up and down completely randomly.

Pair Corralation between Ross Stores and Civitas Resources

Given the investment horizon of 90 days Ross Stores is expected to generate 48.21 times less return on investment than Civitas Resources. But when comparing it to its historical volatility, Ross Stores is 32.66 times less risky than Civitas Resources. It trades about 0.05 of its potential returns per unit of risk. Civitas Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Civitas Resources on September 14, 2024 and sell it today you would lose (6.00) from holding Civitas Resources or give up 26.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Ross Stores  vs.  Civitas Resources

Ross Stores

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Civitas Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Civitas Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ross Stores and Civitas Resources

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

The idea behind Ross Stores and Civitas Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..