Correlation Between Applied Materials, and Costco Wholesale

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

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

Diversification Opportunities for Applied Materials, and Costco Wholesale

0.34

Correlation Coefficient

Applied Materials,  Costco Wholesale

Weak diversification

The 3 months correlation between Applied and Costco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Applied Materials, 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 Applied Materials, 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 Applied Materials, i.e., Applied Materials, and Costco Wholesale go up and down completely randomly.

Pair Corralation between Applied Materials, and Costco Wholesale

Assuming the 90 days trading horizon Applied Materials, is expected to under-perform the Costco Wholesale. In addition to that, Applied Materials, is 1.33 times more volatile than Costco Wholesale. It trades about -0.07 of its total potential returns per unit of risk. Costco Wholesale is currently generating about -0.08 per unit of volatility. If you would invest  14,878  in Costco Wholesale on December 25, 2024 and sell it today you would lose (1,636) from holding Costco Wholesale or give up 11.0% of portfolio value over 90 days.

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

Applied Materials,  vs.  Costco Wholesale

Applied Materials,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Costco Wholesale

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Applied Materials, and Costco Wholesale

The main advantage of trading using opposite Applied Materials, and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials, 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 Applied Materials, 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.