Correlation Between Costco Wholesale and BURLINGTON STORES
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and BURLINGTON STORES 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 BURLINGTON STORES 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 BURLINGTON STORES, you can compare the effects of market volatilities on Costco Wholesale and BURLINGTON STORES 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 BURLINGTON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and BURLINGTON STORES.
Diversification Opportunities for Costco Wholesale and BURLINGTON STORES
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Costco and BURLINGTON is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES 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 BURLINGTON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BURLINGTON STORES has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and BURLINGTON STORES go up and down completely randomly.
Pair Corralation between Costco Wholesale and BURLINGTON STORES
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the BURLINGTON STORES. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 1.67 times less risky than BURLINGTON STORES. The stock trades about -0.37 of its potential returns per unit of risk. The BURLINGTON STORES is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 24,600 in BURLINGTON STORES on December 13, 2024 and sell it today you would lose (3,000) from holding BURLINGTON STORES or give up 12.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. BURLINGTON STORES
Performance |
| Timeline |
| Costco Wholesale Corp |
| BURLINGTON STORES |
Costco Wholesale and BURLINGTON STORES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and BURLINGTON STORES
The main advantage of trading using opposite Costco Wholesale and BURLINGTON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, BURLINGTON STORES 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 BURLINGTON STORES will offset losses from the drop in BURLINGTON STORES's long position.| Costco Wholesale vs. Perseus Mining Limited | ||
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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