Correlation Between Costco Wholesale and JAPAN AIRLINES
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES, you can compare the effects of market volatilities on Costco Wholesale and JAPAN AIRLINES 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 JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and JAPAN AIRLINES.
Diversification Opportunities for Costco Wholesale and JAPAN AIRLINES
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Costco and JAPAN is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and JAPAN AIRLINES go up and down completely randomly.
Pair Corralation between Costco Wholesale and JAPAN AIRLINES
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.88 times more return on investment than JAPAN AIRLINES. However, Costco Wholesale Corp is 1.14 times less risky than JAPAN AIRLINES. It trades about 0.1 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about 0.02 per unit of risk. If you would invest 76,473 in Costco Wholesale Corp on October 19, 2024 and sell it today you would earn a total of 13,197 from holding Costco Wholesale Corp or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Costco Wholesale Corp vs. JAPAN AIRLINES
Performance |
| Timeline |
| Costco Wholesale Corp |
| JAPAN AIRLINES |
Costco Wholesale and JAPAN AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and JAPAN AIRLINES
The main advantage of trading using opposite Costco Wholesale and JAPAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, JAPAN AIRLINES 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 JAPAN AIRLINES will offset losses from the drop in JAPAN AIRLINES's long position.| Costco Wholesale vs. Osisko Metals | Costco Wholesale vs. Marie Brizard Wine | Costco Wholesale vs. Grand Canyon Education | Costco Wholesale vs. EMBARK EDUCATION LTD |
| JAPAN AIRLINES vs. Reinsurance Group of | JAPAN AIRLINES vs. UNIQA INSURANCE GR | JAPAN AIRLINES vs. AM EAGLE OUTFITTERS | JAPAN AIRLINES vs. Tencent Music 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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