Correlation Between Costco Wholesale and Grocery Outlet
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Grocery Outlet 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 Grocery Outlet 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 Grocery Outlet Holding, you can compare the effects of market volatilities on Costco Wholesale and Grocery Outlet 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 Grocery Outlet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Grocery Outlet.
Diversification Opportunities for Costco Wholesale and Grocery Outlet
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Grocery is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Grocery Outlet go up and down completely randomly.
Pair Corralation between Costco Wholesale and Grocery Outlet
Given the investment horizon of 90 days Costco Wholesale Corp is expected to generate 0.27 times more return on investment than Grocery Outlet. However, Costco Wholesale Corp is 3.71 times less risky than Grocery Outlet. It trades about 0.34 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.05 per unit of risk. If you would invest 91,951 in Costco Wholesale Corp on September 19, 2024 and sell it today you would earn a total of 6,257 from holding Costco Wholesale Corp or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Grocery Outlet Holding
Performance |
| Timeline |
| Costco Wholesale Corp |
| Grocery Outlet Holding |
Costco Wholesale and Grocery Outlet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Grocery Outlet
The main advantage of trading using opposite Costco Wholesale and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Grocery Outlet 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 Grocery Outlet will offset losses from the drop in Grocery Outlet's long position.| Costco Wholesale vs. Walmart | Costco Wholesale vs. Dollar Tree | Costco Wholesale vs. BJs Wholesale Club | Costco Wholesale vs. Target |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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