Correlation Between Shoe Carnival and Ross Stores

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

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

Diversification Opportunities for Shoe Carnival and Ross Stores

0.84

Correlation Coefficient

Shoe Carnival  Ross Stores

Very poor diversification

The 3 months correlation between Shoe and Ross is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Shoe Carnival 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 Shoe Carnival are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Shoe Carnival i.e., Shoe Carnival and Ross Stores go up and down completely randomly.

Pair Corralation between Shoe Carnival and Ross Stores

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Ross Stores. In addition to that, Shoe Carnival is 1.65 times more volatile than Ross Stores. It trades about -0.31 of its total potential returns per unit of risk. Ross Stores is currently generating about -0.2 per unit of volatility. If you would invest  15,247  in Ross Stores on December 27, 2024 and sell it today you would lose (2,477) from holding Ross Stores or give up 16.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Shoe Carnival  vs.  Ross Stores

Shoe Carnival

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoe Carnival 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 quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Shoe Carnival and Ross Stores

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

The idea behind Shoe Carnival and Ross Stores 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.