Correlation Between COSTCO WHOLESALE and Coca Cola
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and Coca Cola 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 Coca Cola 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 Coca Cola HBC, you can compare the effects of market volatilities on COSTCO WHOLESALE and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and Coca Cola.
Diversification Opportunities for COSTCO WHOLESALE and Coca Cola
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between COSTCO and Coca is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Coca Cola HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola HBC has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Coca Cola go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and Coca Cola
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.03 times more return on investment than Coca Cola. However, COSTCO WHOLESALE is 1.03 times more volatile than Coca Cola HBC. It trades about 0.09 of its potential returns per unit of risk. Coca Cola HBC is currently generating about 0.07 per unit of risk. If you would invest 1,506 in COSTCO WHOLESALE CDR on September 4, 2024 and sell it today you would earn a total of 1,454 from holding COSTCO WHOLESALE CDR or generate 96.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
COSTCO WHOLESALE CDR vs. Coca Cola HBC
Performance |
| Timeline |
| COSTCO WHOLESALE CDR |
| Coca Cola HBC |
COSTCO WHOLESALE and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSTCO WHOLESALE and Coca Cola
The main advantage of trading using opposite COSTCO WHOLESALE and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| COSTCO WHOLESALE vs. Walmart | COSTCO WHOLESALE vs. Superior Plus Corp | COSTCO WHOLESALE vs. NMI Holdings | COSTCO WHOLESALE vs. Origin Agritech |
| Coca Cola vs. Spirent Communications plc | Coca Cola vs. SK TELECOM TDADR | Coca Cola vs. Tower One Wireless | Coca Cola vs. Entravision Communications |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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