Correlation Between Costco Wholesale and Nokia
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Nokia 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 Nokia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Nokia, you can compare the effects of market volatilities on Costco Wholesale and Nokia 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 Nokia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Nokia.
Diversification Opportunities for Costco Wholesale and Nokia
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Costco and Nokia is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia 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 Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Nokia go up and down completely randomly.
Pair Corralation between Costco Wholesale and Nokia
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.62 times more return on investment than Nokia. However, Costco Wholesale is 1.61 times less risky than Nokia. It trades about 0.2 of its potential returns per unit of risk. Nokia is currently generating about 0.01 per unit of risk. If you would invest 1,739,695 in Costco Wholesale on August 30, 2024 and sell it today you would earn a total of 240,805 from holding Costco Wholesale or generate 13.84% 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. Nokia
Performance |
| Timeline |
| Costco Wholesale |
| Nokia |
Costco Wholesale and Nokia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Nokia
The main advantage of trading using opposite Costco Wholesale and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Nokia 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 Nokia will offset losses from the drop in Nokia'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 |
| Nokia vs. McEwen Mining | Nokia vs. Taiwan Semiconductor Manufacturing | Nokia vs. Verizon Communications | Nokia vs. Costco Wholesale |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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