Correlation Between Costco Wholesale and VersaBank
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and VersaBank 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 VersaBank 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 VersaBank, you can compare the effects of market volatilities on Costco Wholesale and VersaBank 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 VersaBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and VersaBank.
Diversification Opportunities for Costco Wholesale and VersaBank
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and VersaBank is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank 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 VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and VersaBank go up and down completely randomly.
Pair Corralation between Costco Wholesale and VersaBank
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.37 times less return on investment than VersaBank. But when comparing it to its historical volatility, Costco Wholesale Corp is 1.74 times less risky than VersaBank. It trades about 0.15 of its potential returns per unit of risk. VersaBank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,122 in VersaBank on August 26, 2024 and sell it today you would earn a total of 1,248 from holding VersaBank or generate 111.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. VersaBank
Performance |
| Timeline |
| Costco Wholesale Corp |
| VersaBank |
Costco Wholesale and VersaBank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and VersaBank
The main advantage of trading using opposite Costco Wholesale and VersaBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, VersaBank 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 VersaBank will offset losses from the drop in VersaBank's long position.| Costco Wholesale vs. Chatham Rock Phosphate | Costco Wholesale vs. Alaska Energy Metals | Costco Wholesale vs. Elixxer | Costco Wholesale vs. Cielo Waste Solutions |
| VersaBank vs. Sylogist | VersaBank vs. Sangoma Technologies Corp | VersaBank vs. Firan Technology Group | VersaBank vs. Hammond Power Solutions |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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