Correlation Between Davis Commodities and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Davis Commodities 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 Davis Commodities and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Commodities Limited and Costco Wholesale Corp, you can compare the effects of market volatilities on Davis Commodities 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 Davis Commodities with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Commodities and Costco Wholesale.
Diversification Opportunities for Davis Commodities and Costco Wholesale
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Davis and Costco is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Davis Commodities 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 Davis Commodities Limited 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 Corp has no effect on the direction of Davis Commodities i.e., Davis Commodities and Costco Wholesale go up and down completely randomly.
Pair Corralation between Davis Commodities and Costco Wholesale
Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the Costco Wholesale. In addition to that, Davis Commodities is 2.12 times more volatile than Costco Wholesale Corp. It trades about -0.27 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.31 per unit of volatility. If you would invest 88,978 in Costco Wholesale Corp on August 27, 2024 and sell it today you would earn a total of 7,423 from holding Costco Wholesale Corp or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Commodities Limited vs. Costco Wholesale Corp
Performance |
| Timeline |
| Davis Commodities |
| Costco Wholesale Corp |
Davis Commodities and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Commodities and Costco Wholesale
The main advantage of trading using opposite Davis Commodities and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Commodities 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.| Davis Commodities vs. Innovative Food Hldg | Davis Commodities vs. Calavo Growers | Davis Commodities vs. The Chefs Warehouse | Davis Commodities vs. AMCON Distributing |
| Costco Wholesale vs. Walmart | Costco Wholesale vs. Dollar Tree | Costco Wholesale vs. BJs Wholesale Club | Costco Wholesale vs. Target |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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