Correlation Between Costco Wholesale and BCE
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and BCE 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 BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale Corp and BCE Inc Pref, you can compare the effects of market volatilities on Costco Wholesale and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and BCE.
Diversification Opportunities for Costco Wholesale and BCE
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Costco and BCE is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and BCE Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc Pref 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 Corp are associated (or correlated) with BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc Pref has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and BCE go up and down completely randomly.
Pair Corralation between Costco Wholesale and BCE
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.38 times more return on investment than BCE. However, Costco Wholesale is 1.38 times more volatile than BCE Inc Pref. It trades about 0.17 of its potential returns per unit of risk. BCE Inc Pref is currently generating about 0.03 per unit of risk. If you would invest 2,657 in Costco Wholesale Corp on September 14, 2024 and sell it today you would earn a total of 1,924 from holding Costco Wholesale Corp or generate 72.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Costco Wholesale Corp vs. BCE Inc Pref
Performance |
| Timeline |
| Costco Wholesale Corp |
| BCE Inc Pref |
Costco Wholesale and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and BCE
The main advantage of trading using opposite Costco Wholesale and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Costco Wholesale vs. HPQ Silicon Resources | Costco Wholesale vs. East Side Games | Costco Wholesale vs. Northstar Clean Technologies | Costco Wholesale vs. Westshore Terminals Investment |
| BCE vs. Cogeco Communications | BCE vs. Costco Wholesale Corp | BCE vs. Quorum Information Technologies | BCE vs. Vizsla Silver Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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