Correlation Between Costco Wholesale and Apple

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on Costco Wholesale and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Apple.

Diversification Opportunities for Costco Wholesale and Apple

0.7

Correlation Coefficient

Costco Wholesale  Apple

Poor diversification

The 3 months correlation between Costco and Apple is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Apple go up and down completely randomly.

Pair Corralation between Costco Wholesale and Apple

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.83 times more return on investment than Apple. However, Costco Wholesale Corp is 1.2 times less risky than Apple. It trades about 0.17 of its potential returns per unit of risk. Apple Inc is currently generating about 0.08 per unit of risk. If you would invest  80,124  in Costco Wholesale Corp on August 30, 2024 and sell it today you would earn a total of  11,376  from holding Costco Wholesale Corp or generate 14.2% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Apple Inc

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 uncertain basic indicators, Costco Wholesale displayed solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Costco Wholesale and Apple

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

The idea behind Costco Wholesale Corp and Apple Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.