Correlation Between Costco Wholesale and Premium Brands
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Premium Brands 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 Premium Brands 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 Premium Brands Holdings, you can compare the effects of market volatilities on Costco Wholesale and Premium Brands 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 Premium Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Premium Brands.
Diversification Opportunities for Costco Wholesale and Premium Brands
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Costco and Premium is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings 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 Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Premium Brands go up and down completely randomly.
Pair Corralation between Costco Wholesale and Premium Brands
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.6 times more return on investment than Premium Brands. However, Costco Wholesale Corp is 1.67 times less risky than Premium Brands. It trades about 0.22 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about -0.31 per unit of risk. If you would invest 4,171 in Costco Wholesale Corp on August 24, 2024 and sell it today you would earn a total of 258.00 from holding Costco Wholesale Corp or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Premium Brands Holdings
Performance |
| Timeline |
| Costco Wholesale Corp |
| Premium Brands Holdings |
Costco Wholesale and Premium Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Premium Brands
The main advantage of trading using opposite Costco Wholesale and Premium Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Premium Brands 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 Premium Brands will offset losses from the drop in Premium Brands' long position.| Costco Wholesale vs. Restaurant Brands International | Costco Wholesale vs. Enghouse Systems | Costco Wholesale vs. Metro Inc | Costco Wholesale vs. goeasy |
| Premium Brands vs. CCL Industries | Premium Brands vs. North West | Premium Brands vs. Maple Leaf Foods | Premium Brands vs. FirstService 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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