Correlation Between Costco Wholesale and UNIVERSAL MUSIC
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and UNIVERSAL MUSIC 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 UNIVERSAL MUSIC 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 UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on Costco Wholesale and UNIVERSAL MUSIC 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 UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and UNIVERSAL MUSIC.
Diversification Opportunities for Costco Wholesale and UNIVERSAL MUSIC
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and UNIVERSAL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and UNIVERSAL MUSIC GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL MUSIC GROUP 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 UNIVERSAL MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL MUSIC GROUP has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and UNIVERSAL MUSIC go up and down completely randomly.
Pair Corralation between Costco Wholesale and UNIVERSAL MUSIC
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.2 times more return on investment than UNIVERSAL MUSIC. However, Costco Wholesale is 1.2 times more volatile than UNIVERSAL MUSIC GROUP. It trades about 0.44 of its potential returns per unit of risk. UNIVERSAL MUSIC GROUP is currently generating about -0.12 per unit of risk. If you would invest 81,080 in Costco Wholesale Corp on September 4, 2024 and sell it today you would earn a total of 11,700 from holding Costco Wholesale Corp or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. UNIVERSAL MUSIC GROUP
Performance |
| Timeline |
| Costco Wholesale Corp |
| UNIVERSAL MUSIC GROUP |
Costco Wholesale and UNIVERSAL MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and UNIVERSAL MUSIC
The main advantage of trading using opposite Costco Wholesale and UNIVERSAL MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, UNIVERSAL MUSIC 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 UNIVERSAL MUSIC will offset losses from the drop in UNIVERSAL MUSIC's long position.| Costco Wholesale vs. Calibre Mining Corp | Costco Wholesale vs. X FAB Silicon Foundries | Costco Wholesale vs. Wayside Technology Group | Costco Wholesale vs. AECOM TECHNOLOGY |
| UNIVERSAL MUSIC vs. Adtalem Global Education | UNIVERSAL MUSIC vs. Tradeweb Markets | UNIVERSAL MUSIC vs. INTER CARS SA | UNIVERSAL MUSIC vs. RETAIL FOOD GROUP |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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