Correlation Between COSTCO WHOLESALE and New Residential
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and New Residential 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 New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSTCO WHOLESALE CDR and New Residential Investment, you can compare the effects of market volatilities on COSTCO WHOLESALE and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and New Residential.
Diversification Opportunities for COSTCO WHOLESALE and New Residential
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between COSTCO and New is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 CDR are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and New Residential go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and New Residential
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.18 times more return on investment than New Residential. However, COSTCO WHOLESALE is 1.18 times more volatile than New Residential Investment. It trades about 0.09 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.08 per unit of risk. If you would invest 1,451 in COSTCO WHOLESALE CDR on October 11, 2024 and sell it today you would earn a total of 1,349 from holding COSTCO WHOLESALE CDR or generate 92.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSTCO WHOLESALE CDR vs. New Residential Investment
Performance |
| Timeline |
| COSTCO WHOLESALE CDR |
| New Residential Inve |
COSTCO WHOLESALE and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSTCO WHOLESALE and New Residential
The main advantage of trading using opposite COSTCO WHOLESALE and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| COSTCO WHOLESALE vs. CarsalesCom | COSTCO WHOLESALE vs. PACIFIC ONLINE | COSTCO WHOLESALE vs. Alliance Data Systems | COSTCO WHOLESALE vs. Cass Information Systems |
| New Residential vs. China BlueChemical | New Residential vs. Merit Medical Systems | New Residential vs. ENVVENO MEDICAL DL 00001 | New Residential vs. SCANSOURCE |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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