Correlation Between Costco Wholesale and Continental
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Continental 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 Continental 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 Camden Property Trust, you can compare the effects of market volatilities on Costco Wholesale and Continental 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 Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Continental.
Diversification Opportunities for Costco Wholesale and Continental
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Continental is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Continental go up and down completely randomly.
Pair Corralation between Costco Wholesale and Continental
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.81 times more return on investment than Continental. However, Costco Wholesale Corp is 1.24 times less risky than Continental. It trades about 0.05 of its potential returns per unit of risk. Camden Property Trust is currently generating about -0.1 per unit of risk. If you would invest 87,760 in Costco Wholesale Corp on October 11, 2024 and sell it today you would earn a total of 1,850 from holding Costco Wholesale Corp or generate 2.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.44% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Camden Property Trust
Performance |
| Timeline |
| Costco Wholesale Corp |
| Camden Property Trust |
Costco Wholesale and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Continental
The main advantage of trading using opposite Costco Wholesale and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Costco Wholesale vs. Apple Inc | Costco Wholesale vs. Apple Inc | Costco Wholesale vs. Apple Inc | Costco Wholesale vs. Apple Inc |
| Continental vs. MARKET VECTR RETAIL | Continental vs. Costco Wholesale Corp | Continental vs. COSTCO WHOLESALE CDR | Continental vs. Gold Road Resources |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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