Correlation Between Costco Wholesale and Beijing Media

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

Diversification Opportunities for Costco Wholesale and Beijing Media

0.0

Correlation Coefficient

Costco Wholesale  Beijing Media

Pay attention - limited upside

The 3 months correlation between Costco and Beijing is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Beijing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Media 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 Beijing Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Media has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Beijing Media go up and down completely randomly.

Pair Corralation between Costco Wholesale and Beijing Media

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.34 times more return on investment than Beijing Media. However, Costco Wholesale Corp is 2.97 times less risky than Beijing Media. It trades about 0.19 of its potential returns per unit of risk. Beijing Media is currently generating about 0.0 per unit of risk. If you would invest  79,365  in Costco Wholesale Corp on September 4, 2024 and sell it today you would earn a total of  12,855  from holding Costco Wholesale Corp or generate 16.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Costco Wholesale Corp  vs.  Beijing Media

Costco Wholesale Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 15 (%) 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.

Beijing Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Costco Wholesale and Beijing Media

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

The idea behind Costco Wholesale Corp and Beijing Media 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.