Correlation Between Safety Insurance and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Safety Insurance 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 Safety Insurance and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and Costco Wholesale Corp, you can compare the effects of market volatilities on Safety Insurance 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 Safety Insurance with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Costco Wholesale.
Diversification Opportunities for Safety Insurance and Costco Wholesale
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Safety and Costco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group 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 Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and Costco Wholesale go up and down completely randomly.
Pair Corralation between Safety Insurance and Costco Wholesale
Assuming the 90 days horizon Safety Insurance is expected to generate 3.72 times less return on investment than Costco Wholesale. In addition to that, Safety Insurance is 1.19 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 0.1 per unit of volatility. If you would invest 76,473 in Costco Wholesale Corp on October 18, 2024 and sell it today you would earn a total of 12,987 from holding Costco Wholesale Corp or generate 16.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.19% |
| Values | Daily Returns |
Safety Insurance Group vs. Costco Wholesale Corp
Performance |
| Timeline |
| Safety Insurance |
| Costco Wholesale Corp |
Safety Insurance and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and Costco Wholesale
The main advantage of trading using opposite Safety Insurance and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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.| Safety Insurance vs. RYANAIR HLDGS ADR | Safety Insurance vs. DELTA AIR LINES | Safety Insurance vs. QINGCI GAMES INC | Safety Insurance vs. DETALION GAMES SA |
| Costco Wholesale vs. SAN MIGUEL BREWERY | Costco Wholesale vs. ZURICH INSURANCE GROUP | Costco Wholesale vs. United Insurance Holdings | Costco Wholesale vs. Safety Insurance Group |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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