Correlation Between Ross Stores and China Reinsurance

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

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

Diversification Opportunities for Ross Stores and China Reinsurance

-0.43

Correlation Coefficient

Ross Stores  China Reinsurance

Very good diversification

The 3 months correlation between Ross and China is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and China Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reinsurance Corp 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 China Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reinsurance Corp has no effect on the direction of Ross Stores i.e., Ross Stores and China Reinsurance go up and down completely randomly.

Pair Corralation between Ross Stores and China Reinsurance

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.53 times more return on investment than China Reinsurance. However, Ross Stores is 1.9 times less risky than China Reinsurance. It trades about 0.08 of its potential returns per unit of risk. China Reinsurance Corp is currently generating about -0.17 per unit of risk. If you would invest  14,719  in Ross Stores on October 9, 2024 and sell it today you would earn a total of  233.00  from holding Ross Stores or generate 1.58% return on investment over 90 days.

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

Ross Stores  vs.  China Reinsurance Corp

Ross Stores

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ross Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Reinsurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Reinsurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ross Stores and China Reinsurance

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

The idea behind Ross Stores and China Reinsurance Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..