Correlation Between Ross Stores and MICROSOFT

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

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

Diversification Opportunities for Ross Stores and MICROSOFT

-0.53

Correlation Coefficient

Ross Stores  MICROSOFT

Excellent diversification

The 3 months correlation between Ross and MICROSOFT is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and MICROSOFT PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT PORATION 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 MICROSOFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICROSOFT PORATION has no effect on the direction of Ross Stores i.e., Ross Stores and MICROSOFT go up and down completely randomly.

Pair Corralation between Ross Stores and MICROSOFT

Given the investment horizon of 90 days Ross Stores is expected to under-perform the MICROSOFT. In addition to that, Ross Stores is 2.14 times more volatile than MICROSOFT PORATION. It trades about -0.2 of its total potential returns per unit of risk. MICROSOFT PORATION is currently generating about -0.04 per unit of volatility. If you would invest  6,203  in MICROSOFT PORATION on December 29, 2024 and sell it today you would lose (108.00) from holding MICROSOFT PORATION or give up 1.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Ross Stores  vs.  MICROSOFT PORATION

Ross Stores

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

MICROSOFT PORATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days MICROSOFT PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MICROSOFT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ross Stores and MICROSOFT

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

The idea behind Ross Stores and MICROSOFT PORATION 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.