Correlation Between Ross Stores and RLX TECH

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

By analyzing existing cross correlation between Ross Stores and RLX TECH SPADR1, you can compare the effects of market volatilities on Ross Stores and RLX TECH 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 RLX TECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and RLX TECH.

Diversification Opportunities for Ross Stores and RLX TECH

0.56

Correlation Coefficient

Ross Stores  RLX TECH

Very weak diversification

The 3 months correlation between Ross and RLX is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and RLX TECH SPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX TECH SPADR1 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 RLX TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX TECH SPADR1 has no effect on the direction of Ross Stores i.e., Ross Stores and RLX TECH go up and down completely randomly.

Pair Corralation between Ross Stores and RLX TECH

Assuming the 90 days trading horizon Ross Stores is expected to under-perform the RLX TECH. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 2.19 times less risky than RLX TECH. The stock trades about -0.18 of its potential returns per unit of risk. The RLX TECH SPADR1 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  200.00  in RLX TECH SPADR1 on October 26, 2024 and sell it today you would earn a total of  14.00  from holding RLX TECH SPADR1 or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Ross Stores  vs.  RLX TECH SPADR1

Ross Stores

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RLX TECH SPADR1

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RLX TECH SPADR1 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RLX TECH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ross Stores and RLX TECH

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

The idea behind Ross Stores and RLX TECH SPADR1 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.