Correlation Between Costco Wholesale and Micron Technology

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

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

Diversification Opportunities for Costco Wholesale and Micron Technology

-0.22

Correlation Coefficient

Costco Wholesale  Micron Technology

Very good diversification

The 3 months correlation between Costco and Micron is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron 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 Corp are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Micron Technology go up and down completely randomly.

Pair Corralation between Costco Wholesale and Micron Technology

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 0.25 times more return on investment than Micron Technology. However, Costco Wholesale Corp is 4.01 times less risky than Micron Technology. It trades about 0.06 of its potential returns per unit of risk. Micron Technology is currently generating about 0.0 per unit of risk. If you would invest  88,904  in Costco Wholesale Corp on October 11, 2024 and sell it today you would earn a total of  3,600  from holding Costco Wholesale Corp or generate 4.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Costco Wholesale Corp  vs.  Micron Technology

Costco Wholesale Corp

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Micron Technology

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Costco Wholesale and Micron Technology

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

The idea behind Costco Wholesale Corp and Micron 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.