Correlation Between Maple Leaf and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Maple Leaf 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 Maple Leaf and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maple Leaf Foods and Costco Wholesale Corp, you can compare the effects of market volatilities on Maple Leaf 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 Maple Leaf with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Costco Wholesale.
Diversification Opportunities for Maple Leaf and Costco Wholesale
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maple and Costco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods 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 Maple Leaf 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 Maple Leaf Foods 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 Maple Leaf i.e., Maple Leaf and Costco Wholesale go up and down completely randomly.
Pair Corralation between Maple Leaf and Costco Wholesale
Assuming the 90 days trading horizon Maple Leaf is expected to generate 1.33 times less return on investment than Costco Wholesale. In addition to that, Maple Leaf is 1.66 times more volatile than Costco Wholesale Corp. It trades about 0.18 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.4 per unit of volatility. If you would invest 4,059 in Costco Wholesale Corp on September 1, 2024 and sell it today you would earn a total of 459.00 from holding Costco Wholesale Corp or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maple Leaf Foods vs. Costco Wholesale Corp
Performance |
| Timeline |
| Maple Leaf Foods |
| Costco Wholesale Corp |
Maple Leaf and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Costco Wholesale
The main advantage of trading using opposite Maple Leaf and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf 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.| Maple Leaf vs. Leons Furniture Limited | Maple Leaf vs. Autocanada | Maple Leaf vs. Premium Brands Holdings | Maple Leaf vs. Exco Technologies Limited |
| Costco Wholesale vs. Amazon CDR | Costco Wholesale vs. Berkshire Hathaway CDR | Costco Wholesale vs. UnitedHealth Group CDR | Costco Wholesale vs. Apple Inc CDR |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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