Correlation Between Costco Wholesale and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Mastercard Incorporated 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 Mastercard Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Mastercard Incorporated, you can compare the effects of market volatilities on Costco Wholesale and Mastercard Incorporated 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 Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Mastercard Incorporated.
Diversification Opportunities for Costco Wholesale and Mastercard Incorporated
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Costco and Mastercard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between Costco Wholesale and Mastercard Incorporated
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.3 times less return on investment than Mastercard Incorporated. In addition to that, Costco Wholesale is 1.05 times more volatile than Mastercard Incorporated. It trades about 0.13 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.17 per unit of volatility. If you would invest 922,415 in Mastercard Incorporated on August 28, 2024 and sell it today you would earn a total of 140,496 from holding Mastercard Incorporated or generate 15.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Mastercard Incorporated
Performance |
| Timeline |
| Costco Wholesale |
| Mastercard Incorporated |
Costco Wholesale and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Mastercard Incorporated
The main advantage of trading using opposite Costco Wholesale and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Mastercard Incorporated 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 Mastercard Incorporated will offset losses from the drop in Mastercard Incorporated's long position.| Costco Wholesale vs. Hoteles City Express | Costco Wholesale vs. DXC Technology | Costco Wholesale vs. Verizon Communications | Costco Wholesale vs. Grupo Sports World |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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