Correlation Between SCIENCE IN and Costco Wholesale

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

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

Diversification Opportunities for SCIENCE IN and Costco Wholesale

0.3

Correlation Coefficient

SCIENCE IN  Costco Wholesale

Weak diversification

The 3 months correlation between SCIENCE and Costco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SCIENCE IN SPORT 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 SCIENCE IN 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 SCIENCE IN SPORT 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 SCIENCE IN i.e., SCIENCE IN and Costco Wholesale go up and down completely randomly.

Pair Corralation between SCIENCE IN and Costco Wholesale

Assuming the 90 days horizon SCIENCE IN is expected to generate 4.56 times less return on investment than Costco Wholesale. In addition to that, SCIENCE IN is 3.63 times more volatile than Costco Wholesale Corp. It trades about 0.01 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.13 per unit of volatility. If you would invest  82,650  in Costco Wholesale Corp on October 25, 2024 and sell it today you would earn a total of  7,940  from holding Costco Wholesale Corp or generate 9.61% return on investment over 90 days.

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

SCIENCE IN SPORT  vs.  Costco Wholesale Corp

SCIENCE IN SPORT

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SCIENCE IN SPORT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SCIENCE IN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Costco Wholesale Corp

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with SCIENCE IN and Costco Wholesale

The main advantage of trading using opposite SCIENCE IN and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCIENCE IN 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 SCIENCE IN SPORT 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.