Correlation Between Ross Stores and Smurfit WestRock

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

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

Diversification Opportunities for Ross Stores and Smurfit WestRock

0.39

Correlation Coefficient

Ross Stores  Smurfit WestRock

Weak diversification

The 3 months correlation between Ross and Smurfit is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Smurfit WestRock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit WestRock plc 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 Smurfit WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit WestRock plc has no effect on the direction of Ross Stores i.e., Ross Stores and Smurfit WestRock go up and down completely randomly.

Pair Corralation between Ross Stores and Smurfit WestRock

Given the investment horizon of 90 days Ross Stores is expected to generate 0.7 times more return on investment than Smurfit WestRock. However, Ross Stores is 1.42 times less risky than Smurfit WestRock. It trades about -0.04 of its potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.03 per unit of risk. If you would invest  15,451  in Ross Stores on September 30, 2024 and sell it today you would lose (155.00) from holding Ross Stores or give up 1.0% of portfolio value over 90 days.

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

Ross Stores  vs.  Smurfit WestRock plc

Ross Stores

Risk-Adjusted Performance

2 of 100

Weak

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

Smurfit WestRock plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Smurfit WestRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ross Stores and Smurfit WestRock

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

The idea behind Ross Stores and Smurfit WestRock plc 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 Stocks Directory module to find actively traded stocks across global markets.