Correlation Between Ross Stores and Vera Bradley

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

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

Diversification Opportunities for Ross Stores and Vera Bradley

0.32

Correlation Coefficient

Ross Stores  Vera Bradley

Weak diversification

The 3 months correlation between Ross and Vera is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley 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 Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of Ross Stores i.e., Ross Stores and Vera Bradley go up and down completely randomly.

Pair Corralation between Ross Stores and Vera Bradley

Given the investment horizon of 90 days Ross Stores is expected to generate 2.24 times less return on investment than Vera Bradley. But when comparing it to its historical volatility, Ross Stores is 1.7 times less risky than Vera Bradley. It trades about 0.03 of its potential returns per unit of risk. Vera Bradley is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  550.00  in Vera Bradley on August 31, 2024 and sell it today you would earn a total of  27.00  from holding Vera Bradley or generate 4.91% return on investment over 90 days.

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

Ross Stores  vs.  Vera Bradley

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.

Vera Bradley

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Ross Stores and Vera Bradley

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

The idea behind Ross Stores and Vera Bradley 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.