Correlation Between Franklin Covey and Costco Wholesale

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

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

Diversification Opportunities for Franklin Covey and Costco Wholesale

-0.68

Correlation Coefficient

Franklin Covey  Costco Wholesale

Excellent diversification

The 3 months correlation between Franklin and Costco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Covey 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 Franklin Covey 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 Franklin Covey 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 Franklin Covey i.e., Franklin Covey and Costco Wholesale go up and down completely randomly.

Pair Corralation between Franklin Covey and Costco Wholesale

Allowing for the 90-day total investment horizon Franklin Covey is expected to under-perform the Costco Wholesale. In addition to that, Franklin Covey is 2.34 times more volatile than Costco Wholesale Corp. It trades about -0.04 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.15 per unit of volatility. If you would invest  87,740  in Costco Wholesale Corp on September 2, 2024 and sell it today you would earn a total of  9,448  from holding Costco Wholesale Corp or generate 10.77% return on investment over 90 days.

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

Franklin Covey  vs.  Costco Wholesale Corp

Franklin Covey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Covey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Costco Wholesale Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Covey and Costco Wholesale

The main advantage of trading using opposite Franklin Covey and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Covey 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 Franklin Covey 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..