Correlation Between Costco Wholesale and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum, you can compare the effects of market volatilities on Costco Wholesale and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Kaiser Aluminum.
Diversification Opportunities for Costco Wholesale and Kaiser Aluminum
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Costco and Kaiser is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Costco Wholesale and Kaiser Aluminum
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.51 times more return on investment than Kaiser Aluminum. However, Costco Wholesale Corp is 1.96 times less risky than Kaiser Aluminum. It trades about 0.11 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.05 per unit of risk. If you would invest 63,421 in Costco Wholesale Corp on October 18, 2024 and sell it today you would earn a total of 26,039 from holding Costco Wholesale Corp or generate 41.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. Kaiser Aluminum
Performance |
| Timeline |
| Costco Wholesale Corp |
| Kaiser Aluminum |
Costco Wholesale and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Kaiser Aluminum
The main advantage of trading using opposite Costco Wholesale and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Costco Wholesale vs. SAN MIGUEL BREWERY | Costco Wholesale vs. ZURICH INSURANCE GROUP | Costco Wholesale vs. United Insurance Holdings | Costco Wholesale vs. Safety Insurance Group |
| Kaiser Aluminum vs. Costco Wholesale Corp | Kaiser Aluminum vs. FAST RETAIL ADR | Kaiser Aluminum vs. H2O Retailing | Kaiser Aluminum vs. Burlington Stores |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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