Correlation Between Costco Wholesale and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Micron Technology, you can compare the effects of market volatilities on Costco Wholesale and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Micron Technology.
Diversification Opportunities for Costco Wholesale and Micron Technology
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Costco and Micron is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Micron Technology go up and down completely randomly.
Pair Corralation between Costco Wholesale and Micron Technology
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.65 times more return on investment than Micron Technology. However, Costco Wholesale is 1.54 times less risky than Micron Technology. It trades about 0.26 of its potential returns per unit of risk. Micron Technology 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Micron Technology
Performance |
| Timeline |
| Costco Wholesale |
| Micron Technology |
Costco Wholesale and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Micron Technology
The main advantage of trading using opposite Costco Wholesale and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology'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 |
| Micron Technology vs. Southern Copper | Micron Technology vs. McEwen Mining | Micron Technology vs. GMxico Transportes SAB | Micron Technology vs. New Oriental Education |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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