Correlation Between Caseys General and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Caseys General and Costco Wholesale 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 Caseys General and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caseys General Stores and Costco Wholesale Corp, you can compare the effects of market volatilities on Caseys General and Costco Wholesale 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 Caseys General with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Costco Wholesale.
Diversification Opportunities for Caseys General and Costco Wholesale
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caseys and Costco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Caseys General 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 Caseys General Stores are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Caseys General i.e., Caseys General and Costco Wholesale go up and down completely randomly.
Pair Corralation between Caseys General and Costco Wholesale
Assuming the 90 days trading horizon Caseys General is expected to generate 1.52 times less return on investment than Costco Wholesale. In addition to that, Caseys General is 1.23 times more volatile than Costco Wholesale Corp. It trades about 0.09 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.16 per unit of volatility. If you would invest 51,091 in Costco Wholesale Corp on December 3, 2024 and sell it today you would earn a total of 49,629 from holding Costco Wholesale Corp or generate 97.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caseys General Stores vs. Costco Wholesale Corp
Performance |
| Timeline |
| Caseys General Stores |
| Costco Wholesale Corp |
Caseys General and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caseys General and Costco Wholesale
The main advantage of trading using opposite Caseys General and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Caseys General vs. SBI Insurance Group | ||
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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