Correlation Between Exxon and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil and Costco Wholesale, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Costco Wholesale.
Diversification Opportunities for Exxon and Costco Wholesale
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Exxon and Costco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Exxon 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 Exxon Mobil 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 Exxon i.e., Exxon and Costco Wholesale go up and down completely randomly.
Pair Corralation between Exxon and Costco Wholesale
Assuming the 90 days trading horizon Exxon is expected to generate 1.69 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Exxon Mobil is 1.04 times less risky than Costco Wholesale. It trades about 0.11 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,057,596 in Costco Wholesale on September 4, 2024 and sell it today you would earn a total of 922,404 from holding Costco Wholesale or generate 87.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil vs. Costco Wholesale
Performance |
| Timeline |
| Exxon Mobil |
| Costco Wholesale |
Exxon and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Costco Wholesale
The main advantage of trading using opposite Exxon and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.| Exxon vs. Costco Wholesale | Exxon vs. DXC Technology | Exxon vs. CVS Health | Exxon vs. Hoteles City Express |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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