Correlation Between Wal Mart and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Wal Mart 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 Wal Mart and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wal Mart de and Costco Wholesale Corp, you can compare the effects of market volatilities on Wal Mart 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 Wal Mart with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Costco Wholesale.
Diversification Opportunities for Wal Mart and Costco Wholesale
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wal and Costco is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de 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 Wal Mart 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 Wal Mart de 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 Wal Mart i.e., Wal Mart and Costco Wholesale go up and down completely randomly.
Pair Corralation between Wal Mart and Costco Wholesale
Assuming the 90 days horizon Wal Mart de is expected to under-perform the Costco Wholesale. In addition to that, Wal Mart is 1.36 times more volatile than Costco Wholesale Corp. It trades about -0.17 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.29 per unit of volatility. If you would invest 88,978 in Costco Wholesale Corp on August 28, 2024 and sell it today you would earn a total of 7,111 from holding Costco Wholesale Corp or generate 7.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wal Mart de vs. Costco Wholesale Corp
Performance |
| Timeline |
| Wal Mart de |
| Costco Wholesale Corp |
Wal Mart and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wal Mart and Costco Wholesale
The main advantage of trading using opposite Wal Mart and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal Mart 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.| Wal Mart vs. Embotelladora Andina SA | Wal Mart vs. Signet International Holdings | Wal Mart vs. National Beverage Corp | Wal Mart vs. PT Astra International |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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