Correlation Between Ross Stores and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Costco Wholesale 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 Ross Stores and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Costco Wholesale Corp, you can compare the effects of market volatilities on Ross Stores and Costco Wholesale 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 Ross Stores with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Costco Wholesale.
Diversification Opportunities for Ross Stores and Costco Wholesale
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ross and Costco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Ross Stores 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 Ross Stores are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Ross Stores i.e., Ross Stores and Costco Wholesale go up and down completely randomly.
Pair Corralation between Ross Stores and Costco Wholesale
Assuming the 90 days trading horizon Ross Stores is expected to generate 12.14 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Ross Stores is 14.13 times less risky than Costco Wholesale. It trades about 0.05 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 45,610 in Costco Wholesale Corp on October 11, 2024 and sell it today you would earn a total of 46,894 from holding Costco Wholesale Corp or generate 102.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.19% |
| Values | Daily Returns |
Ross Stores vs. Costco Wholesale Corp
Performance |
| Timeline |
| Ross Stores |
| Costco Wholesale Corp |
Ross Stores and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Costco Wholesale
The main advantage of trading using opposite Ross Stores and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Ross Stores vs. Odfjell Drilling | Ross Stores vs. Europa Metals | Ross Stores vs. AMG Advanced Metallurgical | Ross Stores vs. Adriatic Metals |
| Costco Wholesale vs. PPHE Hotel Group | Costco Wholesale vs. Wyndham Hotels Resorts | Costco Wholesale vs. Gamma Communications PLC | Costco Wholesale vs. Infrastrutture Wireless Italiane |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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