Correlation Between COSTCO WHOLESALE and PAX Global

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

Diversification Opportunities for COSTCO WHOLESALE and PAX Global

0.45

Correlation Coefficient

COSTCO WHOLESALE  PAX Global

Very weak diversification

The 3 months correlation between COSTCO and PAX is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and PAX Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Global Technology 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 PAX Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX Global Technology has no effect on the direction of COSTCO WHOLESALE i.e., COSTCO WHOLESALE and PAX Global go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and PAX Global

Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 3.62 times less return on investment than PAX Global. But when comparing it to its historical volatility, COSTCO WHOLESALE CDR is 4.53 times less risky than PAX Global. It trades about 0.11 of its potential returns per unit of risk. PAX Global Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  49.00  in PAX Global Technology on September 13, 2024 and sell it today you would earn a total of  14.00  from holding PAX Global Technology or generate 28.57% 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.  PAX Global Technology

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.

PAX Global Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PAX Global Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PAX Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSTCO WHOLESALE and PAX Global

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

The idea behind COSTCO WHOLESALE CDR and PAX Global Technology 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.