Correlation Between Ross Stores and Revolve Group

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

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

Diversification Opportunities for Ross Stores and Revolve Group

0.58

Correlation Coefficient

Ross Stores  Revolve Group

Very weak diversification

The 3 months correlation between Ross and Revolve is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Revolve Group LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolve Group LLC 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 Revolve Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolve Group LLC has no effect on the direction of Ross Stores i.e., Ross Stores and Revolve Group go up and down completely randomly.

Pair Corralation between Ross Stores and Revolve Group

Given the investment horizon of 90 days Ross Stores is expected to generate 6.96 times less return on investment than Revolve Group. But when comparing it to its historical volatility, Ross Stores is 3.19 times less risky than Revolve Group. It trades about 0.04 of its potential returns per unit of risk. Revolve Group LLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,481  in Revolve Group LLC on October 6, 2024 and sell it today you would earn a total of  1,875  from holding Revolve Group LLC or generate 126.6% return on investment over 90 days.

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

Ross Stores  vs.  Revolve Group LLC

Ross Stores

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Revolve Group LLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Revolve Group LLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Revolve Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ross Stores and Revolve Group

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

The idea behind Ross Stores and Revolve Group LLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.