Correlation Between Costco Wholesale and Baxter International
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Baxter International 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 Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Baxter International, you can compare the effects of market volatilities on Costco Wholesale and Baxter International 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 Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Baxter International.
Diversification Opportunities for Costco Wholesale and Baxter International
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Costco and Baxter is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 are associated (or correlated) with Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Baxter International go up and down completely randomly.
Pair Corralation between Costco Wholesale and Baxter International
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.05 times more return on investment than Baxter International. However, Costco Wholesale is 1.05 times more volatile than Baxter International. It trades about 0.16 of its potential returns per unit of risk. Baxter International is currently generating about -0.03 per unit of risk. If you would invest 1,134,389 in Costco Wholesale on September 12, 2024 and sell it today you would earn a total of 890,764 from holding Costco Wholesale or generate 78.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Baxter International
Performance |
| Timeline |
| Costco Wholesale |
| Baxter International |
Costco Wholesale and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Baxter International
The main advantage of trading using opposite Costco Wholesale and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.| Costco Wholesale vs. Burlington Stores | Costco Wholesale vs. The Select Sector | Costco Wholesale vs. Promotora y Operadora | Costco Wholesale vs. iShares Global Timber |
| Baxter International vs. Verizon Communications | Baxter International vs. KB Home | Baxter International vs. Costco Wholesale | Baxter International vs. Grupo Hotelero Santa |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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