Correlation Between Costco Wholesale and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Solstad Offshore 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 Costco Wholesale and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale Corp and Solstad Offshore ASA, you can compare the effects of market volatilities on Costco Wholesale and Solstad Offshore 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 Costco Wholesale with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Solstad Offshore.
Diversification Opportunities for Costco Wholesale and Solstad Offshore
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and Solstad is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Costco Wholesale 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 Costco Wholesale Corp are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Solstad Offshore go up and down completely randomly.
Pair Corralation between Costco Wholesale and Solstad Offshore
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 8.71 times more return on investment than Solstad Offshore. However, Costco Wholesale is 8.71 times more volatile than Solstad Offshore ASA. It trades about 0.05 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.04 per unit of risk. If you would invest 70,937 in Costco Wholesale Corp on October 29, 2024 and sell it today you would earn a total of 23,302 from holding Costco Wholesale Corp or generate 32.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Solstad Offshore ASA
Performance |
| Timeline |
| Costco Wholesale Corp |
| Solstad Offshore ASA |
Costco Wholesale and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Solstad Offshore
The main advantage of trading using opposite Costco Wholesale and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.| Costco Wholesale vs. Aeorema Communications Plc | Costco Wholesale vs. Cairo Communication SpA | Costco Wholesale vs. Bankers Investment Trust | Costco Wholesale vs. Synchrony Financial |
| Solstad Offshore vs. Eneraqua Technologies PLC | Solstad Offshore vs. Take Two Interactive Software | Solstad Offshore vs. Electronic Arts | Solstad Offshore vs. Samsung Electronics Co |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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