Correlation Between Costco Wholesale and Power Financial
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Power Financial 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 Power Financial 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 Power Financial Corp, you can compare the effects of market volatilities on Costco Wholesale and Power Financial 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 Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Power Financial.
Diversification Opportunities for Costco Wholesale and Power Financial
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and Power is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial Corp 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 Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Power Financial go up and down completely randomly.
Pair Corralation between Costco Wholesale and Power Financial
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.57 times more return on investment than Power Financial. However, Costco Wholesale is 1.57 times more volatile than Power Financial Corp. It trades about 0.32 of its potential returns per unit of risk. Power Financial Corp is currently generating about -0.1 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Power Financial Corp
Performance |
| Timeline |
| Costco Wholesale Corp |
| Power Financial Corp |
Costco Wholesale and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Power Financial
The main advantage of trading using opposite Costco Wholesale and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Power Financial 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 Power Financial will offset losses from the drop in Power Financial's long position.| Costco Wholesale vs. Maple Leaf Foods | Costco Wholesale vs. Falcon Energy Materials | Costco Wholesale vs. MTY Food Group | Costco Wholesale vs. Goodfood Market Corp |
| Power Financial vs. Manulife Financial Corp | Power Financial vs. Great West Lifeco | Power Financial vs. Great West Lifeco |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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