Correlation Between Visa and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Costco Wholesale Corp, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Costco Wholesale.
Diversification Opportunities for Visa and Costco Wholesale
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Costco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Costco Wholesale go up and down completely randomly.
Pair Corralation between Visa and Costco Wholesale
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.03 times more return on investment than Costco Wholesale. However, Visa is 1.03 times more volatile than Costco Wholesale Corp. It trades about 0.33 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.31 per unit of risk. If you would invest 28,365 in Visa Class A on August 27, 2024 and sell it today you would earn a total of 2,627 from holding Visa Class A or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Costco Wholesale Corp
Performance |
| Timeline |
| Visa Class A |
| Costco Wholesale Corp |
Visa and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Costco Wholesale
The main advantage of trading using opposite Visa and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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