Correlation Between Ross Stores and Paramount Global

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

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

Diversification Opportunities for Ross Stores and Paramount Global

-0.48

Correlation Coefficient

Ross Stores  Paramount Global

Very good diversification

The 3 months correlation between Ross and Paramount is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Paramount Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global has no effect on the direction of Ross Stores i.e., Ross Stores and Paramount Global go up and down completely randomly.

Pair Corralation between Ross Stores and Paramount Global

Assuming the 90 days trading horizon Ross Stores is expected to under-perform the Paramount Global. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 1.07 times less risky than Paramount Global. The stock trades about -0.24 of its potential returns per unit of risk. The Paramount Global is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,386  in Paramount Global on December 25, 2024 and sell it today you would earn a total of  228.00  from holding Paramount Global or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ross Stores  vs.  Paramount Global

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.

Paramount Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Paramount Global 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 Paramount Global

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

The idea behind Ross Stores and Paramount Global 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.