Correlation Between Diamond Estates and Costco Wholesale

Can any of the company-specific risk be diversified away by investing in both Diamond Estates and Costco Wholesale 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 Diamond Estates and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diamond Estates Wines and Costco Wholesale Corp, you can compare the effects of market volatilities on Diamond Estates and Costco Wholesale 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 Diamond Estates with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and Costco Wholesale.

Diversification Opportunities for Diamond Estates and Costco Wholesale

-0.78

Correlation Coefficient

Diamond Estates  Costco Wholesale

Pay attention - limited upside

The 3 months correlation between Diamond and Costco is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Diamond Estates 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 Diamond Estates Wines are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Diamond Estates i.e., Diamond Estates and Costco Wholesale go up and down completely randomly.

Pair Corralation between Diamond Estates and Costco Wholesale

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Costco Wholesale. In addition to that, Diamond Estates is 4.69 times more volatile than Costco Wholesale Corp. It trades about -0.12 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.13 per unit of volatility. If you would invest  4,186  in Costco Wholesale Corp on September 19, 2024 and sell it today you would earn a total of  365.00  from holding Costco Wholesale Corp or generate 8.72% return on investment over 90 days.

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

Diamond Estates Wines  vs.  Costco Wholesale Corp

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Costco Wholesale Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Estates and Costco Wholesale

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

The idea behind Diamond Estates Wines and Costco Wholesale Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.