Correlation Between Costco Wholesale and Big Yellow
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Big Yellow 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 Big Yellow 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 Big Yellow Group, you can compare the effects of market volatilities on Costco Wholesale and Big Yellow 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 Big Yellow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Big Yellow.
Diversification Opportunities for Costco Wholesale and Big Yellow
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Costco and Big is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow 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 Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Big Yellow go up and down completely randomly.
Pair Corralation between Costco Wholesale and Big Yellow
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 18.25 times more return on investment than Big Yellow. However, Costco Wholesale is 18.25 times more volatile than Big Yellow Group. It trades about 0.05 of its potential returns per unit of risk. Big Yellow Group is currently generating about -0.02 per unit of risk. If you would invest 71,509 in Costco Wholesale Corp on November 3, 2024 and sell it today you would earn a total of 27,087 from holding Costco Wholesale Corp or generate 37.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Big Yellow Group
Performance |
| Timeline |
| Costco Wholesale Corp |
| Big Yellow Group |
Costco Wholesale and Big Yellow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Big Yellow
The main advantage of trading using opposite Costco Wholesale and Big Yellow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Big Yellow 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 Big Yellow will offset losses from the drop in Big Yellow's long position.| Costco Wholesale vs. Finnair Oyj | Costco Wholesale vs. Porvair plc | Costco Wholesale vs. China Pacific Insurance | Costco Wholesale vs. Automatic Data Processing |
| Big Yellow vs. Derwent London PLC | Big Yellow vs. Hammerson PLC | Big Yellow vs. Workspace Group PLC | Big Yellow vs. Supermarket Income REIT |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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