Correlation Between Costco Wholesale and DocuSign

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

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

Diversification Opportunities for Costco Wholesale and DocuSign

0.94

Correlation Coefficient

Costco Wholesale  DocuSign

Almost no diversification

The 3 months correlation between Costco and DocuSign is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and DocuSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DocuSign 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 DocuSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DocuSign has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and DocuSign go up and down completely randomly.

Pair Corralation between Costco Wholesale and DocuSign

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 2.71 times less return on investment than DocuSign. But when comparing it to its historical volatility, Costco Wholesale is 2.56 times less risky than DocuSign. It trades about 0.21 of its potential returns per unit of risk. DocuSign is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,711  in DocuSign on September 27, 2024 and sell it today you would earn a total of  1,247  from holding DocuSign or generate 72.88% return on investment over 90 days.

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

Costco Wholesale  vs.  DocuSign

Costco Wholesale

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Costco Wholesale sustained solid returns over the last few months and may actually be approaching a breakup point.

DocuSign

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DocuSign are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DocuSign sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Costco Wholesale and DocuSign

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

The idea behind Costco Wholesale and DocuSign 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.