Correlation Between BANK HANDLOWY and Costco Wholesale

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

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

Diversification Opportunities for BANK HANDLOWY and Costco Wholesale

-0.53

Correlation Coefficient

BANK HANDLOWY  Costco Wholesale

Excellent diversification

The 3 months correlation between BANK and Costco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BANK HANDLOWY and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and BANK HANDLOWY 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 BANK HANDLOWY 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 has no effect on the direction of BANK HANDLOWY i.e., BANK HANDLOWY and Costco Wholesale go up and down completely randomly.

Pair Corralation between BANK HANDLOWY and Costco Wholesale

Assuming the 90 days trading horizon BANK HANDLOWY is expected to generate 6.23 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, BANK HANDLOWY is 2.05 times less risky than Costco Wholesale. It trades about 0.04 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  82,870  in Costco Wholesale on September 13, 2024 and sell it today you would earn a total of  10,530  from holding Costco Wholesale or generate 12.71% return on investment over 90 days.

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

BANK HANDLOWY  vs.  Costco Wholesale

BANK HANDLOWY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BANK HANDLOWY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BANK HANDLOWY is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Costco Wholesale

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with BANK HANDLOWY and Costco Wholesale

The main advantage of trading using opposite BANK HANDLOWY and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK HANDLOWY 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 BANK HANDLOWY and Costco Wholesale 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.