Correlation Between COSTCO WHOLESALE and WESTLAKE CHEMICAL
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE and WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL, you can compare the effects of market volatilities on COSTCO WHOLESALE and WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and WESTLAKE CHEMICAL.
Diversification Opportunities for COSTCO WHOLESALE and WESTLAKE CHEMICAL
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between COSTCO and WESTLAKE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and WESTLAKE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLAKE CHEMICAL has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and WESTLAKE CHEMICAL go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and WESTLAKE CHEMICAL
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.16 times more return on investment than WESTLAKE CHEMICAL. However, COSTCO WHOLESALE is 1.16 times more volatile than WESTLAKE CHEMICAL. It trades about 0.28 of its potential returns per unit of risk. WESTLAKE CHEMICAL is currently generating about 0.04 per unit of risk. If you would invest 2,660 in COSTCO WHOLESALE CDR on September 4, 2024 and sell it today you would earn a total of 300.00 from holding COSTCO WHOLESALE CDR or generate 11.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSTCO WHOLESALE CDR vs. WESTLAKE CHEMICAL
Performance |
| Timeline |
| COSTCO WHOLESALE CDR |
| WESTLAKE CHEMICAL |
COSTCO WHOLESALE and WESTLAKE CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSTCO WHOLESALE and WESTLAKE CHEMICAL
The main advantage of trading using opposite COSTCO WHOLESALE and WESTLAKE CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE position performs unexpectedly, WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL will offset losses from the drop in WESTLAKE CHEMICAL's long position.| COSTCO WHOLESALE vs. Walmart | COSTCO WHOLESALE vs. Superior Plus Corp | COSTCO WHOLESALE vs. NMI Holdings | COSTCO WHOLESALE vs. Origin Agritech |
| WESTLAKE CHEMICAL vs. Insurance Australia Group | WESTLAKE CHEMICAL vs. SBI Insurance Group | WESTLAKE CHEMICAL vs. Singapore Reinsurance | WESTLAKE CHEMICAL vs. British American Tobacco |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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