Correlation Between Select Sector and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Select Sector 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 Select Sector and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and Costco Wholesale, you can compare the effects of market volatilities on Select Sector 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 Select Sector with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and Costco Wholesale.
Diversification Opportunities for Select Sector and Costco Wholesale
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Select and Costco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and Costco Wholesale go up and down completely randomly.
Pair Corralation between Select Sector and Costco Wholesale
Assuming the 90 days trading horizon Select Sector is expected to generate 1.43 times less return on investment than Costco Wholesale. In addition to that, Select Sector is 1.44 times more volatile than Costco Wholesale. It trades about 0.08 of its total potential returns per unit of risk. Costco Wholesale is currently generating about 0.16 per unit of volatility. If you would invest 1,134,389 in Costco Wholesale on September 12, 2024 and sell it today you would earn a total of 880,611 from holding Costco Wholesale or generate 77.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. Costco Wholesale
Performance |
| Timeline |
| Select Sector |
| Costco Wholesale |
Select Sector and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and Costco Wholesale
The main advantage of trading using opposite Select Sector and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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.| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
| Costco Wholesale vs. Burlington Stores | Costco Wholesale vs. The Select Sector | Costco Wholesale vs. Promotora y Operadora | Costco Wholesale vs. iShares Global Timber |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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