Correlation Between Albertsons Companies and Costco Wholesale

Can any of the company-specific risk be diversified away by investing in both Albertsons Companies 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 Albertsons Companies and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Albertsons Companies and Costco Wholesale Corp, you can compare the effects of market volatilities on Albertsons Companies 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 Albertsons Companies with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albertsons Companies and Costco Wholesale.

Diversification Opportunities for Albertsons Companies and Costco Wholesale

0.74

Correlation Coefficient

Albertsons Companies  Costco Wholesale

Poor diversification

The 3 months correlation between Albertsons and Costco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Albertsons Companies 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 Albertsons Companies 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 Albertsons Companies 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 Albertsons Companies i.e., Albertsons Companies and Costco Wholesale go up and down completely randomly.

Pair Corralation between Albertsons Companies and Costco Wholesale

Considering the 90-day investment horizon Albertsons Companies is expected to generate 2.39 times less return on investment than Costco Wholesale. In addition to that, Albertsons Companies is 1.39 times more volatile than Costco Wholesale Corp. It trades about 0.04 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.12 per unit of volatility. If you would invest  89,954  in Costco Wholesale Corp on September 19, 2024 and sell it today you would earn a total of  7,298  from holding Costco Wholesale Corp or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Albertsons Companies  vs.  Costco Wholesale Corp

Albertsons Companies

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albertsons Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Albertsons Companies is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Costco Wholesale Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Albertsons Companies and Costco Wholesale

The main advantage of trading using opposite Albertsons Companies and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albertsons Companies 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.

The idea behind Albertsons Companies and Costco Wholesale Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.