Correlation Between COSTCO WHOLESALE and Dassault Systmes

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

Diversification Opportunities for COSTCO WHOLESALE and Dassault Systmes

-0.25

Correlation Coefficient

COSTCO WHOLESALE  Dassault Systmes

Very good diversification

The 3 months correlation between COSTCO and Dassault is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Dassault Systmes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systmes 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 Dassault Systmes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systmes has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Dassault Systmes go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Dassault Systmes

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 0.86 times more return on investment than Dassault Systmes. However, COSTCO WHOLESALE CDR is 1.17 times less risky than Dassault Systmes. It trades about 0.11 of its potential returns per unit of risk. Dassault Systmes SE is currently generating about 0.02 per unit of risk. If you would invest  1,401  in COSTCO WHOLESALE CDR on September 12, 2024 and sell it today you would earn a total of  1,699  from holding COSTCO WHOLESALE CDR or generate 121.27% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  Dassault Systmes SE

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 9 (%) 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.

Dassault Systmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systmes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dassault Systmes 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 Dassault Systmes

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

The idea behind COSTCO WHOLESALE CDR and Dassault Systmes SE 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.