Correlation Between Costco Wholesale and NetApp
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and NetApp 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 NetApp 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 NetApp Inc, you can compare the effects of market volatilities on Costco Wholesale and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and NetApp.
Diversification Opportunities for Costco Wholesale and NetApp
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and NetApp is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and NetApp go up and down completely randomly.
Pair Corralation between Costco Wholesale and NetApp
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.56 times more return on investment than NetApp. However, Costco Wholesale Corp is 1.78 times less risky than NetApp. It trades about 0.42 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.16 per unit of risk. If you would invest 81,080 in Costco Wholesale Corp on September 4, 2024 and sell it today you would earn a total of 11,140 from holding Costco Wholesale Corp or generate 13.74% 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. NetApp Inc
Performance |
| Timeline |
| Costco Wholesale Corp |
| NetApp Inc |
Costco Wholesale and NetApp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and NetApp
The main advantage of trading using opposite Costco Wholesale and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.| Costco Wholesale vs. Calibre Mining Corp | Costco Wholesale vs. X FAB Silicon Foundries | Costco Wholesale vs. Wayside Technology Group | Costco Wholesale vs. AECOM TECHNOLOGY |
| NetApp vs. Teradata Corp | NetApp vs. Superior Plus Corp | NetApp vs. NMI Holdings | NetApp vs. Origin Agritech |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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