Correlation Between Grocery Outlet and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Grocery Outlet 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 Grocery Outlet and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grocery Outlet Holding and Costco Wholesale Corp, you can compare the effects of market volatilities on Grocery Outlet 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 Grocery Outlet with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and Costco Wholesale.
Diversification Opportunities for Grocery Outlet and Costco Wholesale
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grocery and Costco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding 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 Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Costco Wholesale go up and down completely randomly.
Pair Corralation between Grocery Outlet and Costco Wholesale
Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Costco Wholesale. In addition to that, Grocery Outlet is 3.71 times more volatile than Costco Wholesale Corp. It trades about -0.05 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.34 per unit of volatility. If you would invest 91,951 in Costco Wholesale Corp on September 18, 2024 and sell it today you would earn a total of 6,257 from holding Costco Wholesale Corp or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grocery Outlet Holding vs. Costco Wholesale Corp
Performance |
| Timeline |
| Grocery Outlet Holding |
| Costco Wholesale Corp |
Grocery Outlet and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grocery Outlet and Costco Wholesale
The main advantage of trading using opposite Grocery Outlet and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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.The idea behind Grocery Outlet Holding and Costco Wholesale Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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