Correlation Between Costco Wholesale and ADF
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and ADF 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 ADF 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 ADF Group, you can compare the effects of market volatilities on Costco Wholesale and ADF 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 ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and ADF.
Diversification Opportunities for Costco Wholesale and ADF
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and ADF is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group 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 ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and ADF go up and down completely randomly.
Pair Corralation between Costco Wholesale and ADF
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 2.56 times less return on investment than ADF. But when comparing it to its historical volatility, Costco Wholesale Corp is 3.16 times less risky than ADF. It trades about 0.12 of its potential returns per unit of risk. ADF Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 211.00 in ADF Group on October 13, 2024 and sell it today you would earn a total of 674.00 from holding ADF Group or generate 319.43% 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. ADF Group
Performance |
| Timeline |
| Costco Wholesale Corp |
| ADF Group |
Costco Wholesale and ADF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and ADF
The main advantage of trading using opposite Costco Wholesale and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.| Costco Wholesale vs. Computer Modelling Group | Costco Wholesale vs. Rogers Communications | Costco Wholesale vs. Homerun Resources | Costco Wholesale vs. Brookfield Office Properties |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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