Correlation Between COSTCO WHOLESALE and Dow Jones
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on COSTCO WHOLESALE and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and Dow Jones.
Diversification Opportunities for COSTCO WHOLESALE and Dow Jones
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between COSTCO and Dow is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Dow Jones go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and Dow Jones
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 2.28 times more return on investment than Dow Jones. However, COSTCO WHOLESALE is 2.28 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 2,206 in COSTCO WHOLESALE CDR on August 29, 2024 and sell it today you would earn a total of 794.00 from holding COSTCO WHOLESALE CDR or generate 35.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.05% |
| Values | Daily Returns |
COSTCO WHOLESALE CDR vs. Dow Jones Industrial
Performance |
| Timeline |
COSTCO WHOLESALE and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
COSTCO WHOLESALE CDR
Pair trading matchups for COSTCO WHOLESALE
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with COSTCO WHOLESALE and Dow Jones
The main advantage of trading using opposite COSTCO WHOLESALE and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| COSTCO WHOLESALE vs. Walmart | COSTCO WHOLESALE vs. Walmart | COSTCO WHOLESALE vs. Costco Wholesale | COSTCO WHOLESALE vs. Target |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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