Correlation Between Associated British and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Costco Wholesale Corp, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Costco Wholesale.
Diversification Opportunities for Associated British and Costco Wholesale
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Costco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods 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 Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Costco Wholesale go up and down completely randomly.
Pair Corralation between Associated British and Costco Wholesale
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Costco Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.06 times less risky than Costco Wholesale. The stock trades about -0.44 of its potential returns per unit of risk. The Costco Wholesale Corp is currently generating about -0.36 of returns per unit of risk over similar time horizon. If you would invest 99,197 in Costco Wholesale Corp on October 11, 2024 and sell it today you would lose (6,693) from holding Costco Wholesale Corp or give up 6.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Associated British Foods vs. Costco Wholesale Corp
Performance |
| Timeline |
| Associated British Foods |
| Costco Wholesale Corp |
Associated British and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Costco Wholesale
The main advantage of trading using opposite Associated British and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Synchrony Financial | Associated British vs. Sydbank | Associated British vs. International Biotechnology Trust | Associated British vs. FinecoBank SpA |
| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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