Correlation Between Costco Wholesale and ITM Power
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and ITM Power 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 ITM Power 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 ITM Power, you can compare the effects of market volatilities on Costco Wholesale and ITM Power 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 ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and ITM Power.
Diversification Opportunities for Costco Wholesale and ITM Power
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Costco and ITM is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and ITM Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power 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 ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and ITM Power go up and down completely randomly.
Pair Corralation between Costco Wholesale and ITM Power
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.23 times more return on investment than ITM Power. However, Costco Wholesale Corp is 4.35 times less risky than ITM Power. It trades about -0.08 of its potential returns per unit of risk. ITM Power is currently generating about -0.05 per unit of risk. If you would invest 95,859 in Costco Wholesale Corp on October 25, 2024 and sell it today you would lose (1,516) from holding Costco Wholesale Corp or give up 1.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. ITM Power
Performance |
| Timeline |
| Costco Wholesale Corp |
| ITM Power |
Costco Wholesale and ITM Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and ITM Power
The main advantage of trading using opposite Costco Wholesale and ITM Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, ITM Power 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 ITM Power will offset losses from the drop in ITM Power's long position.| Costco Wholesale vs. Gamma Communications PLC | Costco Wholesale vs. Spirent Communications plc | Costco Wholesale vs. URU Metals | Costco Wholesale vs. Verizon Communications |
| ITM Power vs. Thor Mining PLC | ITM Power vs. Europa Metals | ITM Power vs. Wheaton Precious Metals | ITM Power vs. Chrysalis Investments |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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