Correlation Between Costco Wholesale and Caribbean Utilities
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities, you can compare the effects of market volatilities on Costco Wholesale and Caribbean Utilities 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 Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Caribbean Utilities.
Diversification Opportunities for Costco Wholesale and Caribbean Utilities
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and Caribbean is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Caribbean Utilities go up and down completely randomly.
Pair Corralation between Costco Wholesale and Caribbean Utilities
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.24 times more return on investment than Caribbean Utilities. However, Costco Wholesale is 1.24 times more volatile than Caribbean Utilities. It trades about 0.31 of its potential returns per unit of risk. Caribbean Utilities is currently generating about 0.03 per unit of risk. If you would invest 4,136 in Costco Wholesale Corp on August 29, 2024 and sell it today you would earn a total of 369.00 from holding Costco Wholesale Corp or generate 8.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Caribbean Utilities
Performance |
| Timeline |
| Costco Wholesale Corp |
| Caribbean Utilities |
Costco Wholesale and Caribbean Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Caribbean Utilities
The main advantage of trading using opposite Costco Wholesale and Caribbean Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Caribbean Utilities 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 Caribbean Utilities will offset losses from the drop in Caribbean Utilities' long position.| Costco Wholesale vs. CVW CleanTech | Costco Wholesale vs. Ramp Metals | Costco Wholesale vs. Firan Technology Group | Costco Wholesale vs. Oculus VisionTech |
| Caribbean Utilities vs. Innergex Renewable Energy | Caribbean Utilities vs. Northland Power | Caribbean Utilities vs. Capital Power | Caribbean Utilities vs. Brookfield Renewable Partners |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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