Correlation Between Costco Wholesale and RETAIL FOOD
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and RETAIL FOOD 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 RETAIL FOOD 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 RETAIL FOOD GROUP, you can compare the effects of market volatilities on Costco Wholesale and RETAIL FOOD 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 RETAIL FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and RETAIL FOOD.
Diversification Opportunities for Costco Wholesale and RETAIL FOOD
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and RETAIL is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and RETAIL FOOD go up and down completely randomly.
Pair Corralation between Costco Wholesale and RETAIL FOOD
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.12 times less return on investment than RETAIL FOOD. But when comparing it to its historical volatility, Costco Wholesale Corp is 1.77 times less risky than RETAIL FOOD. It trades about 0.39 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3.70 in RETAIL FOOD GROUP on August 27, 2024 and sell it today you would earn a total of 0.50 from holding RETAIL FOOD GROUP or generate 13.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. RETAIL FOOD GROUP
Performance |
| Timeline |
| Costco Wholesale Corp |
| RETAIL FOOD GROUP |
Costco Wholesale and RETAIL FOOD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and RETAIL FOOD
The main advantage of trading using opposite Costco Wholesale and RETAIL FOOD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, RETAIL FOOD 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 RETAIL FOOD will offset losses from the drop in RETAIL FOOD's long position.| Costco Wholesale vs. Mitsui Chemicals | Costco Wholesale vs. JJ SNACK FOODS | Costco Wholesale vs. Mitsubishi Gas Chemical | Costco Wholesale vs. United Natural Foods |
| RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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