Correlation Between Ramp Metals and Costco Wholesale

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

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

Diversification Opportunities for Ramp Metals and Costco Wholesale

0.23

Correlation Coefficient

Ramp Metals  Costco Wholesale

Modest diversification

The 3 months correlation between Ramp and Costco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ramp Metals 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 Ramp Metals 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 Ramp Metals 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 Ramp Metals i.e., Ramp Metals and Costco Wholesale go up and down completely randomly.

Pair Corralation between Ramp Metals and Costco Wholesale

Assuming the 90 days trading horizon Ramp Metals is expected to generate 4.1 times more return on investment than Costco Wholesale. However, Ramp Metals is 4.1 times more volatile than Costco Wholesale Corp. It trades about 0.14 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.06 per unit of risk. If you would invest  53.00  in Ramp Metals on September 23, 2024 and sell it today you would earn a total of  21.00  from holding Ramp Metals or generate 39.62% return on investment over 90 days.

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

Ramp Metals  vs.  Costco Wholesale Corp

Ramp Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ramp Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Ramp Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Costco Wholesale Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Costco Wholesale is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ramp Metals and Costco Wholesale

The main advantage of trading using opposite Ramp Metals and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ramp Metals 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 Ramp Metals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.