Correlation Between Costco Wholesale and H2O Retailing
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and H2O Retailing 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 H2O Retailing 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 H2O Retailing, you can compare the effects of market volatilities on Costco Wholesale and H2O Retailing 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 H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and H2O Retailing.
Diversification Opportunities for Costco Wholesale and H2O Retailing
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Costco and H2O is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing 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 H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and H2O Retailing go up and down completely randomly.
Pair Corralation between Costco Wholesale and H2O Retailing
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to under-perform the H2O Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Costco Wholesale Corp is 2.22 times less risky than H2O Retailing. The stock trades about -0.27 of its potential returns per unit of risk. The H2O Retailing is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,350 in H2O Retailing on October 12, 2024 and sell it today you would lose (10.00) from holding H2O Retailing or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Costco Wholesale Corp vs. H2O Retailing
Performance |
| Timeline |
| Costco Wholesale Corp |
| H2O Retailing |
Costco Wholesale and H2O Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and H2O Retailing
The main advantage of trading using opposite Costco Wholesale and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.| Costco Wholesale vs. BRIT AMER TOBACCO | Costco Wholesale vs. GREENX METALS LTD | Costco Wholesale vs. Transport International Holdings | Costco Wholesale vs. Air Lease |
| H2O Retailing vs. PEPKOR LTD | H2O Retailing vs. Superior Plus Corp | H2O Retailing vs. NMI Holdings | H2O Retailing vs. SIVERS SEMICONDUCTORS AB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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