Correlation Between DATANG INTL and Costco Wholesale

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

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

Diversification Opportunities for DATANG INTL and Costco Wholesale

-0.04

Correlation Coefficient

DATANG INTL  Costco Wholesale

Good diversification

The 3 months correlation between DATANG and Costco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding DATANG INTL POW 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 DATANG INTL 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 DATANG INTL POW 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 DATANG INTL i.e., DATANG INTL and Costco Wholesale go up and down completely randomly.

Pair Corralation between DATANG INTL and Costco Wholesale

Assuming the 90 days trading horizon DATANG INTL is expected to generate 3.47 times less return on investment than Costco Wholesale. In addition to that, DATANG INTL is 2.86 times more volatile than Costco Wholesale Corp. It trades about 0.02 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.17 per unit of volatility. If you would invest  79,984  in Costco Wholesale Corp on September 3, 2024 and sell it today you would earn a total of  11,606  from holding Costco Wholesale Corp or generate 14.51% return on investment over 90 days.

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

DATANG INTL POW  vs.  Costco Wholesale Corp

DATANG INTL POW

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DATANG INTL POW are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DATANG INTL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Costco Wholesale Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Costco Wholesale displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DATANG INTL and Costco Wholesale

The main advantage of trading using opposite DATANG INTL and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATANG INTL 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 DATANG INTL POW 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.