Correlation Between Costco Wholesale and Carsales
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on Costco Wholesale and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Carsales.
Diversification Opportunities for Costco Wholesale and Carsales
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Costco and Carsales is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Carsales go up and down completely randomly.
Pair Corralation between Costco Wholesale and Carsales
Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.26 times more return on investment than Carsales. However, Costco Wholesale is 1.26 times more volatile than CarsalesCom. It trades about 0.44 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.51 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 11,700 from holding Costco Wholesale Corp or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale Corp vs. CarsalesCom
Performance |
| Timeline |
| Costco Wholesale Corp |
| CarsalesCom |
Costco Wholesale and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Carsales
The main advantage of trading using opposite Costco Wholesale and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' 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 |
| Carsales vs. BRIT AMER TOBACCO | Carsales vs. Japan Tobacco | Carsales vs. MICRONIC MYDATA | Carsales vs. FUYO GENERAL LEASE |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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