Correlation Between Dollarama and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Dollarama and Costco Wholesale 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 Dollarama and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollarama and Costco Wholesale, you can compare the effects of market volatilities on Dollarama and Costco Wholesale 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 Dollarama with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and Costco Wholesale.
Diversification Opportunities for Dollarama and Costco Wholesale
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dollarama and Costco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Dollarama 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 Dollarama are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Dollarama i.e., Dollarama and Costco Wholesale go up and down completely randomly.
Pair Corralation between Dollarama and Costco Wholesale
Assuming the 90 days horizon Dollarama is expected to generate 5.23 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Dollarama is 1.08 times less risky than Costco Wholesale. It trades about 0.08 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 80,134 in Costco Wholesale on September 1, 2024 and sell it today you would earn a total of 11,986 from holding Costco Wholesale or generate 14.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dollarama vs. Costco Wholesale
Performance |
| Timeline |
| Dollarama |
| Costco Wholesale |
Dollarama and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollarama and Costco Wholesale
The main advantage of trading using opposite Dollarama and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Dollarama vs. REINET INVESTMENTS SCA | Dollarama vs. Virtus Investment Partners | Dollarama vs. SEI INVESTMENTS | Dollarama vs. Jacquet Metal Service |
| Costco Wholesale vs. Applied Materials | Costco Wholesale vs. RETAIL FOOD GROUP | Costco Wholesale vs. Salesforce | Costco Wholesale vs. SIDETRADE EO 1 |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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