Correlation Between Costco Wholesale and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Gamma Communications 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 Gamma Communications 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 Gamma Communications PLC, you can compare the effects of market volatilities on Costco Wholesale and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Gamma Communications.
Diversification Opportunities for Costco Wholesale and Gamma Communications
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Costco and Gamma is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Gamma Communications go up and down completely randomly.
Pair Corralation between Costco Wholesale and Gamma Communications
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 15.83 times more return on investment than Gamma Communications. However, Costco Wholesale is 15.83 times more volatile than Gamma Communications PLC. It trades about 0.05 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about 0.06 per unit of risk. If you would invest 53,613 in Costco Wholesale Corp on October 25, 2024 and sell it today you would earn a total of 40,730 from holding Costco Wholesale Corp or generate 75.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Gamma Communications PLC
Performance |
| Timeline |
| Costco Wholesale Corp |
| Gamma Communications PLC |
Costco Wholesale and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Gamma Communications
The main advantage of trading using opposite Costco Wholesale and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| Costco Wholesale vs. Gamma Communications PLC | Costco Wholesale vs. Spirent Communications plc | Costco Wholesale vs. URU Metals | Costco Wholesale vs. Verizon Communications |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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