Correlation Between European Residential and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both European Residential 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 European Residential and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Residential Real and Costco Wholesale Corp, you can compare the effects of market volatilities on European Residential 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 European Residential with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Costco Wholesale.
Diversification Opportunities for European Residential and Costco Wholesale
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between European and Costco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real 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 European Residential 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 European Residential Real 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 European Residential i.e., European Residential and Costco Wholesale go up and down completely randomly.
Pair Corralation between European Residential and Costco Wholesale
Assuming the 90 days trading horizon European Residential Real is expected to generate 1.79 times more return on investment than Costco Wholesale. However, European Residential is 1.79 times more volatile than Costco Wholesale Corp. It trades about 0.18 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.15 per unit of risk. If you would invest 225.00 in European Residential Real on September 3, 2024 and sell it today you would earn a total of 155.00 from holding European Residential Real or generate 68.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Residential Real vs. Costco Wholesale Corp
Performance |
| Timeline |
| European Residential Real |
| Costco Wholesale Corp |
European Residential and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Residential and Costco Wholesale
The main advantage of trading using opposite European Residential and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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.| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
| Costco Wholesale vs. High Liner Foods | Costco Wholesale vs. Richelieu Hardware | Costco Wholesale vs. International Zeolite Corp | Costco Wholesale vs. European Residential Real |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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