Correlation Between Ross Stores and Gap,

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

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

Diversification Opportunities for Ross Stores and Gap,

0.03

Correlation Coefficient

Ross Stores  Gap,

Significant diversification

The 3 months correlation between Ross and Gap, is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Ross Stores i.e., Ross Stores and Gap, go up and down completely randomly.

Pair Corralation between Ross Stores and Gap,

Given the investment horizon of 90 days Ross Stores is expected to generate 2.65 times less return on investment than Gap,. But when comparing it to its historical volatility, Ross Stores is 2.64 times less risky than Gap,. It trades about 0.05 of its potential returns per unit of risk. The Gap, is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,281  in The Gap, on August 31, 2024 and sell it today you would earn a total of  1,141  from holding The Gap, or generate 89.07% return on investment over 90 days.

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

Ross Stores  vs.  The Gap,

Ross Stores

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 2 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Gap,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ross Stores and Gap,

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

The idea behind Ross Stores and The Gap, 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.