Correlation Between Costco Wholesale and Healthpeak Properties

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

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

Diversification Opportunities for Costco Wholesale and Healthpeak Properties

0.74

Correlation Coefficient

Costco Wholesale  Healthpeak Properties

Poor diversification

The 3 months correlation between Costco and Healthpeak is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Healthpeak Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthpeak Properties 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 Healthpeak Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthpeak Properties has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Healthpeak Properties go up and down completely randomly.

Pair Corralation between Costco Wholesale and Healthpeak Properties

Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.59 times more return on investment than Healthpeak Properties. However, Costco Wholesale is 1.59 times more volatile than Healthpeak Properties. It trades about 0.16 of its potential returns per unit of risk. Healthpeak Properties is currently generating about 0.13 per unit of risk. If you would invest  12,942  in Costco Wholesale on September 12, 2024 and sell it today you would earn a total of  2,106  from holding Costco Wholesale or generate 16.27% return on investment over 90 days.

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

Costco Wholesale  vs.  Healthpeak Properties

Costco Wholesale

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 12 (%) 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.

Healthpeak Properties

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Healthpeak Properties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Healthpeak Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Costco Wholesale and Healthpeak Properties

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

The idea behind Costco Wholesale and Healthpeak Properties 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.