Correlation Between COSTCO WHOLESALE and RETAIL FOOD

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

Diversification Opportunities for COSTCO WHOLESALE and RETAIL FOOD

0.61

Correlation Coefficient

COSTCO WHOLESALE  RETAIL FOOD

Poor diversification

The 3 months correlation between COSTCO and RETAIL is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and RETAIL FOOD go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and RETAIL FOOD

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 1.18 times more return on investment than RETAIL FOOD. However, COSTCO WHOLESALE is 1.18 times more volatile than RETAIL FOOD GROUP. It trades about 0.14 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about -0.46 per unit of risk. If you would invest  2,920  in COSTCO WHOLESALE CDR on September 15, 2024 and sell it today you would earn a total of  140.00  from holding COSTCO WHOLESALE CDR or generate 4.79% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  RETAIL FOOD GROUP

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.

RETAIL FOOD GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with COSTCO WHOLESALE and RETAIL FOOD

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

The idea behind COSTCO WHOLESALE CDR and RETAIL FOOD 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.