Correlation Between Prudential Financial and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Prudential Financial 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 Prudential Financial and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Costco Wholesale, you can compare the effects of market volatilities on Prudential Financial 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 Prudential Financial with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Costco Wholesale.
Diversification Opportunities for Prudential Financial and Costco Wholesale
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Costco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Prudential Financial 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 Prudential Financial 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 has no effect on the direction of Prudential Financial i.e., Prudential Financial and Costco Wholesale go up and down completely randomly.
Pair Corralation between Prudential Financial and Costco Wholesale
Assuming the 90 days trading horizon Prudential Financial is expected to under-perform the Costco Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial is 2.16 times less risky than Costco Wholesale. The stock trades about -0.41 of its potential returns per unit of risk. The Costco Wholesale is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 14,855 in Costco Wholesale on October 12, 2024 and sell it today you would lose (735.00) from holding Costco Wholesale or give up 4.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. Costco Wholesale
Performance |
| Timeline |
| Prudential Financial |
| Costco Wholesale |
Prudential Financial and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Costco Wholesale
The main advantage of trading using opposite Prudential Financial and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial 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.| Prudential Financial vs. Paycom Software | Prudential Financial vs. New Oriental Education | Prudential Financial vs. Hormel Foods | Prudential Financial vs. Marfrig Global Foods |
| Costco Wholesale vs. Prudential Financial | Costco Wholesale vs. ICICI Bank Limited | Costco Wholesale vs. Beyond Meat | Costco Wholesale vs. Annaly Capital Management, |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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