Correlation Between Lands End and Ross Stores

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

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

Diversification Opportunities for Lands End and Ross Stores

-0.91

Correlation Coefficient

Lands End  Ross Stores

Pay attention - limited upside

The 3 months correlation between Lands and Ross is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Lands End 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 Lands End 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 Lands End i.e., Lands End and Ross Stores go up and down completely randomly.

Pair Corralation between Lands End and Ross Stores

Allowing for the 90-day total investment horizon Lands End is expected to generate 3.02 times more return on investment than Ross Stores. However, Lands End is 3.02 times more volatile than Ross Stores. It trades about 0.31 of its potential returns per unit of risk. Ross Stores is currently generating about -0.23 per unit of risk. If you would invest  1,107  in Lands End on February 8, 2024 and sell it today you would earn a total of  306.00  from holding Lands End or generate 27.64% return on investment over 90 days.

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

Lands End  vs.  Ross Stores

Lands End

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lands End are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lands End exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ross Stores

Risk-Adjusted Performance

0 of 100

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 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 Lands End and Ross Stores

The main advantage of trading using opposite Lands End and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End 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 Lands End 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.