Correlation Between Birks and Ross Stores

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

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

Diversification Opportunities for Birks and Ross Stores

0.66

Correlation Coefficient

Birks  Ross Stores

Poor diversification

The 3 months correlation between Birks and Ross is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Birks 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 Birks Group 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 Birks i.e., Birks and Ross Stores go up and down completely randomly.

Pair Corralation between Birks and Ross Stores

Considering the 90-day investment horizon Birks Group is expected to under-perform the Ross Stores. In addition to that, Birks is 2.43 times more volatile than Ross Stores. It trades about -0.44 of its total potential returns per unit of risk. Ross Stores is currently generating about -0.04 per unit of volatility. If you would invest  14,524  in Ross Stores on August 24, 2024 and sell it today you would lose (228.00) from holding Ross Stores or give up 1.57% of portfolio value over 90 days.

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

Birks Group  vs.  Ross Stores

Birks Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 conflicting 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 Birks and Ross Stores

The main advantage of trading using opposite Birks and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birks 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 Birks Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .