Correlation Between Costco Wholesale and Pan American
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Pan American 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 Pan American 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 Pan American Silver, you can compare the effects of market volatilities on Costco Wholesale and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Pan American.
Diversification Opportunities for Costco Wholesale and Pan American
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and Pan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Pan American go up and down completely randomly.
Pair Corralation between Costco Wholesale and Pan American
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 4.1 times more return on investment than Pan American. However, Costco Wholesale is 4.1 times more volatile than Pan American Silver. It trades about 0.06 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.09 per unit of risk. If you would invest 67,487 in Costco Wholesale Corp on November 9, 2024 and sell it today you would earn a total of 37,143 from holding Costco Wholesale Corp or generate 55.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 62.92% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Pan American Silver
Performance |
| Timeline |
| Costco Wholesale Corp |
| Pan American Silver |
Costco Wholesale and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Pan American
The main advantage of trading using opposite Costco Wholesale and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.| Costco Wholesale vs. Wheaton Precious Metals | Costco Wholesale vs. Edita Food Industries | Costco Wholesale vs. Jacquet Metal Service | Costco Wholesale vs. Axfood AB |
| Pan American vs. Primary Health Properties | Pan American vs. United Utilities Group | Pan American vs. Wizz Air Holdings | Pan American vs. Amedeo Air Four |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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