Correlation Between Costco Wholesale and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Auto Trader 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 Auto Trader 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 Auto Trader Group, you can compare the effects of market volatilities on Costco Wholesale and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Auto Trader.
Diversification Opportunities for Costco Wholesale and Auto Trader
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and Auto is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Auto Trader go up and down completely randomly.
Pair Corralation between Costco Wholesale and Auto Trader
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the Auto Trader. In addition to that, Costco Wholesale is 1.08 times more volatile than Auto Trader Group. It trades about -0.05 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.1 per unit of volatility. If you would invest 78,074 in Auto Trader Group on October 22, 2024 and sell it today you would earn a total of 1,286 from holding Auto Trader Group or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Auto Trader Group
Performance |
| Timeline |
| Costco Wholesale Corp |
| Auto Trader Group |
Costco Wholesale and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Auto Trader
The main advantage of trading using opposite Costco Wholesale and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Costco Wholesale vs. Qurate Retail Series | Costco Wholesale vs. Dairy Farm International | Costco Wholesale vs. Axfood AB | Costco Wholesale vs. Ebro Foods |
| Auto Trader vs. LPKF Laser Electronics | Auto Trader vs. Zoom Video Communications | Auto Trader vs. Costco Wholesale Corp | Auto Trader 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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