Correlation Between Ross Stores and Enlight Renewable

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

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

Diversification Opportunities for Ross Stores and Enlight Renewable

0.43

Correlation Coefficient

Ross Stores  Enlight Renewable

Very weak diversification

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

Pair Corralation between Ross Stores and Enlight Renewable

Given the investment horizon of 90 days Ross Stores is expected to generate 48.35 times less return on investment than Enlight Renewable. But when comparing it to its historical volatility, Ross Stores is 39.66 times less risky than Enlight Renewable. It trades about 0.04 of its potential returns per unit of risk. Enlight Renewable Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Enlight Renewable Energy on September 26, 2024 and sell it today you would lose (340.00) from holding Enlight Renewable Energy or give up 17.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ross Stores  vs.  Enlight Renewable Energy

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Enlight Renewable Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ross Stores and Enlight Renewable

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

The idea behind Ross Stores and Enlight Renewable Energy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.