Correlation Between Costco Wholesale and Walmart
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Walmart, you can compare the effects of market volatilities on Costco Wholesale and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Walmart.
Diversification Opportunities for Costco Wholesale and Walmart
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Costco and Walmart is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Walmart go up and down completely randomly.
Pair Corralation between Costco Wholesale and Walmart
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.08 times more return on investment than Walmart. However, Costco Wholesale is 1.08 times more volatile than Walmart. It trades about 0.12 of its potential returns per unit of risk. Walmart is currently generating about 0.11 per unit of risk. If you would invest 918,434 in Costco Wholesale on August 27, 2024 and sell it today you would earn a total of 1,060,366 from holding Costco Wholesale or generate 115.45% 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. Walmart
Performance |
| Timeline |
| Costco Wholesale |
| Walmart |
Costco Wholesale and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Walmart
The main advantage of trading using opposite Costco Wholesale and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart'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 |
| Walmart vs. Grupo Sports World | Walmart vs. GMxico Transportes SAB | Walmart vs. Ameriprise Financial | Walmart vs. Applied Materials |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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