Correlation Between Ross Stores and American Express

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

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

Diversification Opportunities for Ross Stores and American Express

0.79

Correlation Coefficient

Ross Stores  American Express

Poor diversification

The 3 months correlation between Ross and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Ross Stores i.e., Ross Stores and American Express go up and down completely randomly.

Pair Corralation between Ross Stores and American Express

Assuming the 90 days trading horizon Ross Stores is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 1.71 times less risky than American Express. The stock trades about -0.19 of its potential returns per unit of risk. The American Express is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  18,752  in American Express on December 26, 2024 and sell it today you would lose (2,983) from holding American Express or give up 15.91% of portfolio value over 90 days.

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

Ross Stores  vs.  American Express

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ross Stores and American Express

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

The idea behind Ross Stores and American Express 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.