Correlation Between Ross Stores and NAKED WINES

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

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

Diversification Opportunities for Ross Stores and NAKED WINES

-0.53

Correlation Coefficient

Ross Stores  NAKED WINES

Excellent diversification

The 3 months correlation between Ross and NAKED is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and NAKED WINES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAKED WINES PLC 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 NAKED WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAKED WINES PLC has no effect on the direction of Ross Stores i.e., Ross Stores and NAKED WINES go up and down completely randomly.

Pair Corralation between Ross Stores and NAKED WINES

Assuming the 90 days trading horizon Ross Stores is expected to generate 0.35 times more return on investment than NAKED WINES. However, Ross Stores is 2.85 times less risky than NAKED WINES. It trades about 0.05 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.02 per unit of risk. If you would invest  10,533  in Ross Stores on September 20, 2024 and sell it today you would earn a total of  3,749  from holding Ross Stores or generate 35.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Ross Stores  vs.  NAKED WINES PLC

Ross Stores

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

NAKED WINES PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAKED WINES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NAKED WINES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ross Stores and NAKED WINES

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

The idea behind Ross Stores and NAKED WINES PLC 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.