Correlation Between Costco Wholesale and Inspiration Healthcare

Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Inspiration Healthcare 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 Inspiration Healthcare 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 Inspiration Healthcare Group, you can compare the effects of market volatilities on Costco Wholesale and Inspiration Healthcare 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 Inspiration Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Inspiration Healthcare.

Diversification Opportunities for Costco Wholesale and Inspiration Healthcare

-0.59

Correlation Coefficient

Costco Wholesale  Inspiration Healthcare

Excellent diversification

The 3 months correlation between Costco and Inspiration is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Inspiration Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspiration Healthcare 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 Inspiration Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspiration Healthcare has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Inspiration Healthcare go up and down completely randomly.

Pair Corralation between Costco Wholesale and Inspiration Healthcare

Assuming the 90 days trading horizon Costco Wholesale Corp is expected to generate 4.81 times more return on investment than Inspiration Healthcare. However, Costco Wholesale is 4.81 times more volatile than Inspiration Healthcare Group. It trades about 0.04 of its potential returns per unit of risk. Inspiration Healthcare Group is currently generating about -0.05 per unit of risk. If you would invest  45,610  in Costco Wholesale Corp on October 11, 2024 and sell it today you would earn a total of  46,894  from holding Costco Wholesale Corp or generate 102.82% return on investment over 90 days.

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

Costco Wholesale Corp  vs.  Inspiration Healthcare Group

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.

Inspiration Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspiration Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Costco Wholesale and Inspiration Healthcare

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

The idea behind Costco Wholesale Corp and Inspiration Healthcare Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.