Correlation Between COSTCO WHOLESALE and Mr Cooper

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

By analyzing existing cross correlation between COSTCO WHOLESALE CDR and Mr Cooper Group, you can compare the effects of market volatilities on COSTCO WHOLESALE and Mr Cooper 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 Mr Cooper. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and Mr Cooper.

Diversification Opportunities for COSTCO WHOLESALE and Mr Cooper

0.8

Correlation Coefficient

COSTCO WHOLESALE  Mr Cooper

Very poor diversification

The 3 months correlation between COSTCO and 07WA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Mr Cooper Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Cooper Group 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 CDR are associated (or correlated) with Mr Cooper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Cooper Group has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Mr Cooper go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Mr Cooper

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.2 times more return on investment than Mr Cooper. However, COSTCO WHOLESALE is 1.2 times more volatile than Mr Cooper Group. It trades about -0.08 of its potential returns per unit of risk. Mr Cooper Group is currently generating about -0.19 per unit of risk. If you would invest  3,000  in COSTCO WHOLESALE CDR on September 25, 2024 and sell it today you would lose (80.00) from holding COSTCO WHOLESALE CDR or give up 2.67% of portfolio value over 90 days.

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

COSTCO WHOLESALE CDR  vs.  Mr Cooper Group

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mr Cooper Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Cooper Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mr Cooper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSTCO WHOLESALE and Mr Cooper

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

The idea behind COSTCO WHOLESALE CDR and Mr Cooper Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.