Correlation Between Caseys General and Costco Wholesale

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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

CaseysCostcoDiversified AwayCaseysCostcoDiversified Away100%
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 1.6 times less return on investment than Costco Wholesale. In addition to that, Caseys General is 1.3 times more volatile than Costco Wholesale Corp. It trades about 0.1 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.2 per unit of volatility. If you would invest  80,991  in Costco Wholesale Corp on December 3, 2024 and sell it today you would earn a total of  17,369  from holding Costco Wholesale Corp or generate 21.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Caseys General Stores  vs.  Costco Wholesale Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15CS2 CTO
       Timeline  
Caseys General Stores 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Caseys General Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caseys General is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15JanFebFebMar380390400410420
Costco Wholesale Corp 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in April 2025.
JavaScript chart by amCharts 3.21.15JanFebFebMar8809009209409609801,0001,020

Caseys General and Costco Wholesale Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.26-1.69-1.12-0.55-0.0093840.541.111.682.25 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15CS2 CTO
       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.
The idea behind Caseys General Stores and Costco Wholesale Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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