Correlation Between Costco Wholesale and EDISON INTL
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and EDISON INTL 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 EDISON INTL 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 EDISON INTL, you can compare the effects of market volatilities on Costco Wholesale and EDISON INTL 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 EDISON INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and EDISON INTL.
Diversification Opportunities for Costco Wholesale and EDISON INTL
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Costco and EDISON is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and EDISON INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL 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 EDISON INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDISON INTL has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and EDISON INTL go up and down completely randomly.
Pair Corralation between Costco Wholesale and EDISON INTL
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.38 times more return on investment than EDISON INTL. However, Costco Wholesale is 1.38 times more volatile than EDISON INTL. It trades about 0.13 of its potential returns per unit of risk. EDISON INTL is currently generating about 0.08 per unit of risk. If you would invest 41,552 in Costco Wholesale Corp on September 12, 2024 and sell it today you would earn a total of 52,918 from holding Costco Wholesale Corp or generate 127.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. EDISON INTL
Performance |
| Timeline |
| Costco Wholesale Corp |
| EDISON INTL |
Costco Wholesale and EDISON INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and EDISON INTL
The main advantage of trading using opposite Costco Wholesale and EDISON INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, EDISON INTL 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 EDISON INTL will offset losses from the drop in EDISON INTL's long position.| Costco Wholesale vs. PennyMac Mortgage Investment | Costco Wholesale vs. Singapore Airlines Limited | Costco Wholesale vs. Aegean Airlines SA | Costco Wholesale vs. Southwest Airlines Co |
| EDISON INTL vs. DICKS Sporting Goods | EDISON INTL vs. NTG Nordic Transport | EDISON INTL vs. Columbia Sportswear | EDISON INTL vs. PARKEN Sport Entertainment |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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