Correlation Between Costco Wholesale and TINC Comm

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

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

Diversification Opportunities for Costco Wholesale and TINC Comm

-0.68

Correlation Coefficient

Costco Wholesale  TINC Comm

Excellent diversification

The 3 months correlation between Costco and TINC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and TINC Comm VA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TINC Comm VA 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 Corp are associated (or correlated) with TINC Comm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TINC Comm VA has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and TINC Comm go up and down completely randomly.

Pair Corralation between Costco Wholesale and TINC Comm

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 1.29 times more return on investment than TINC Comm. However, Costco Wholesale is 1.29 times more volatile than TINC Comm VA. It trades about 0.17 of its potential returns per unit of risk. TINC Comm VA is currently generating about -0.06 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Costco Wholesale Corp  vs.  TINC Comm VA

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.

TINC Comm VA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TINC Comm VA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TINC Comm is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Costco Wholesale and TINC Comm

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

The idea behind Costco Wholesale Corp and TINC Comm VA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.