Correlation Between Microsoft Corp and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp 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 Microsoft Corp and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and Costco Wholesale Corp, you can compare the effects of market volatilities on Microsoft Corp 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 Microsoft Corp with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Costco Wholesale.
Diversification Opportunities for Microsoft Corp and Costco Wholesale
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Costco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR 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 Microsoft Corp 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 Microsoft Corp CDR 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 Microsoft Corp i.e., Microsoft Corp and Costco Wholesale go up and down completely randomly.
Pair Corralation between Microsoft Corp and Costco Wholesale
Assuming the 90 days trading horizon Microsoft Corp CDR is expected to under-perform the Costco Wholesale. In addition to that, Microsoft Corp is 1.22 times more volatile than Costco Wholesale Corp. It trades about -0.02 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.18 per unit of volatility. If you would invest 4,117 in Costco Wholesale Corp on August 30, 2024 and sell it today you would earn a total of 344.00 from holding Costco Wholesale Corp or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. Costco Wholesale Corp
Performance |
| Timeline |
| Microsoft Corp CDR |
| Costco Wholesale Corp |
Microsoft Corp and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and Costco Wholesale
The main advantage of trading using opposite Microsoft Corp and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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.| Microsoft Corp vs. Berkshire Hathaway CDR | Microsoft Corp vs. JPMorgan Chase Co | Microsoft Corp vs. Bank of America | Microsoft Corp vs. Alphabet Inc CDR |
| Costco Wholesale vs. CVW CleanTech | Costco Wholesale vs. Ramp Metals | Costco Wholesale vs. Firan Technology Group | Costco Wholesale vs. Oculus VisionTech |
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 CEOs Directory module to screen CEOs from public companies around the world.
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