Correlation Between Costco Wholesale and Dollarama
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Dollarama 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 Dollarama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Dollarama, you can compare the effects of market volatilities on Costco Wholesale and Dollarama 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 Dollarama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Dollarama.
Diversification Opportunities for Costco Wholesale and Dollarama
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Dollarama is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Dollarama go up and down completely randomly.
Pair Corralation between Costco Wholesale and Dollarama
Assuming the 90 days horizon Costco Wholesale is expected to generate 1.08 times more return on investment than Dollarama. However, Costco Wholesale is 1.08 times more volatile than Dollarama. It trades about 0.37 of its potential returns per unit of risk. Dollarama is currently generating about 0.08 per unit of risk. If you would invest 80,134 in Costco Wholesale on September 1, 2024 and sell it today you would earn a total of 11,986 from holding Costco Wholesale or generate 14.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Costco Wholesale vs. Dollarama
Performance |
| Timeline |
| Costco Wholesale |
| Dollarama |
Costco Wholesale and Dollarama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Dollarama
The main advantage of trading using opposite Costco Wholesale and Dollarama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Dollarama 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 Dollarama will offset losses from the drop in Dollarama's long position.| Costco Wholesale vs. Applied Materials | Costco Wholesale vs. RETAIL FOOD GROUP | Costco Wholesale vs. Salesforce | Costco Wholesale vs. SIDETRADE EO 1 |
| Dollarama vs. REINET INVESTMENTS SCA | Dollarama vs. Virtus Investment Partners | Dollarama vs. SEI INVESTMENTS | Dollarama vs. Jacquet Metal Service |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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