Correlation Between Costco Wholesale and FibraHotel
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and FibraHotel 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 FibraHotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and FibraHotel, you can compare the effects of market volatilities on Costco Wholesale and FibraHotel 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 FibraHotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and FibraHotel.
Diversification Opportunities for Costco Wholesale and FibraHotel
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and FibraHotel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel 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 FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and FibraHotel go up and down completely randomly.
Pair Corralation between Costco Wholesale and FibraHotel
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.72 times more return on investment than FibraHotel. However, Costco Wholesale is 1.4 times less risky than FibraHotel. It trades about 0.26 of its potential returns per unit of risk. FibraHotel is currently generating about 0.1 per unit of risk. If you would invest 1,782,737 in Costco Wholesale on August 30, 2024 and sell it today you would earn a total of 197,763 from holding Costco Wholesale or generate 11.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. FibraHotel
Performance |
| Timeline |
| Costco Wholesale |
| FibraHotel |
Costco Wholesale and FibraHotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and FibraHotel
The main advantage of trading using opposite Costco Wholesale and FibraHotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, FibraHotel 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 FibraHotel will offset losses from the drop in FibraHotel's long position.| Costco Wholesale vs. United Airlines Holdings | Costco Wholesale vs. Grupo Hotelero Santa | Costco Wholesale vs. Capital One Financial | Costco Wholesale vs. Hoteles City Express |
| FibraHotel vs. CVS Health | FibraHotel vs. Grupo Sports World | FibraHotel vs. DXC Technology | FibraHotel vs. GMxico Transportes SAB |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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