Correlation Between COSTCO WHOLESALE and Power Assets

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

Diversification Opportunities for COSTCO WHOLESALE and Power Assets

0.58

Correlation Coefficient

COSTCO WHOLESALE  Power Assets

Very weak diversification

The 3 months correlation between COSTCO and Power is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Power Assets go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Power Assets

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.13 times more return on investment than Power Assets. However, COSTCO WHOLESALE is 1.13 times more volatile than Power Assets Holdings. It trades about 0.1 of its potential returns per unit of risk. Power Assets Holdings is currently generating about 0.02 per unit of risk. If you would invest  2,774  in COSTCO WHOLESALE CDR on September 16, 2024 and sell it today you would earn a total of  286.00  from holding COSTCO WHOLESALE CDR or generate 10.31% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  Power Assets Holdings

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 8 (%) 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.

Power Assets Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power Assets Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Power Assets is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COSTCO WHOLESALE and Power Assets

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

The idea behind COSTCO WHOLESALE CDR and Power Assets Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.