Correlation Between Ross Stores and FLOW TRADERS

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Can any of the company-specific risk be diversified away by investing in both Ross Stores and FLOW TRADERS 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 FLOW TRADERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and FLOW TRADERS LTD, you can compare the effects of market volatilities on Ross Stores and FLOW TRADERS 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 FLOW TRADERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and FLOW TRADERS.

Diversification Opportunities for Ross Stores and FLOW TRADERS

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between Ross and FLOW is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD 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 FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of Ross Stores i.e., Ross Stores and FLOW TRADERS go up and down completely randomly.

Pair Corralation between Ross Stores and FLOW TRADERS

Assuming the 90 days trading horizon Ross Stores is expected to generate 1.74 times less return on investment than FLOW TRADERS. In addition to that, Ross Stores is 1.35 times more volatile than FLOW TRADERS LTD. It trades about 0.08 of its total potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.19 per unit of volatility. If you would invest  1,776  in FLOW TRADERS LTD on September 6, 2024 and sell it today you would earn a total of  304.00  from holding FLOW TRADERS LTD or generate 17.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.46%
ValuesDaily Returns

Ross Stores  vs.  FLOW TRADERS LTD

 Performance 
       Timeline  
Ross Stores 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.
FLOW TRADERS LTD 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FLOW TRADERS reported solid returns over the last few months and may actually be approaching a breakup point.

Ross Stores and FLOW TRADERS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ross Stores and FLOW TRADERS

The main advantage of trading using opposite Ross Stores and FLOW TRADERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, FLOW TRADERS 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 FLOW TRADERS will offset losses from the drop in FLOW TRADERS's long position.
The idea behind Ross Stores and FLOW TRADERS LTD 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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