Correlation Between Costco Wholesale and Crown Castle

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

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

Diversification Opportunities for Costco Wholesale and Crown Castle

-0.31

Correlation Coefficient

Costco Wholesale  Crown Castle

Very good diversification

The 3 months correlation between Costco and Crown is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Crown Castle International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle Interna and Costco Wholesale 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 Costco Wholesale are associated (or correlated) with Crown Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Castle Interna has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Crown Castle go up and down completely randomly.

Pair Corralation between Costco Wholesale and Crown Castle

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.51 times more return on investment than Crown Castle. However, Costco Wholesale is 1.95 times less risky than Crown Castle. It trades about 0.19 of its potential returns per unit of risk. Crown Castle International is currently generating about -0.04 per unit of risk. If you would invest  12,234  in Costco Wholesale on September 26, 2024 and sell it today you would earn a total of  2,635  from holding Costco Wholesale or generate 21.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Costco Wholesale  vs.  Crown Castle International

Costco Wholesale

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Costco Wholesale sustained solid returns over the last few months and may actually be approaching a breakup point.

Crown Castle Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Costco Wholesale and Crown Castle

The main advantage of trading using opposite Costco Wholesale and Crown Castle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Crown Castle 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 Crown Castle will offset losses from the drop in Crown Castle's long position.

The idea behind Costco Wholesale and Crown Castle International 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.