Correlation Between Costco Wholesale and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Applied Materials, you can compare the effects of market volatilities on Costco Wholesale and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Applied Materials.
Diversification Opportunities for Costco Wholesale and Applied Materials
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and Applied is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Applied Materials go up and down completely randomly.
Pair Corralation between Costco Wholesale and Applied Materials
Assuming the 90 days horizon Costco Wholesale is expected to generate 0.53 times more return on investment than Applied Materials. However, Costco Wholesale is 1.88 times less risky than Applied Materials. It trades about 0.12 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 per unit of risk. If you would invest 43,863 in Costco Wholesale on September 1, 2024 and sell it today you would earn a total of 48,257 from holding Costco Wholesale or generate 110.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Applied Materials
Performance |
| Timeline |
| Costco Wholesale |
| Applied Materials |
Costco Wholesale and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Applied Materials
The main advantage of trading using opposite Costco Wholesale and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Costco Wholesale vs. Applied Materials | Costco Wholesale vs. RETAIL FOOD GROUP | Costco Wholesale vs. Salesforce | Costco Wholesale vs. SIDETRADE EO 1 |
| Applied Materials vs. National Beverage Corp | Applied Materials vs. Austevoll Seafood ASA | Applied Materials vs. DICKER DATA LTD | Applied Materials vs. PUBLIC STORAGE PRFO |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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