Correlation Between AGF Management and Costco Wholesale

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

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

Diversification Opportunities for AGF Management and Costco Wholesale

0.77

Correlation Coefficient

AGF Management  Costco Wholesale

Poor diversification

The 3 months correlation between AGF and Costco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and AGF Management 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 AGF Management Limited 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 AGF Management i.e., AGF Management and Costco Wholesale go up and down completely randomly.

Pair Corralation between AGF Management and Costco Wholesale

Assuming the 90 days horizon AGF Management Limited is expected to generate 1.11 times more return on investment than Costco Wholesale. However, AGF Management is 1.11 times more volatile than Costco Wholesale. It trades about -0.01 of its potential returns per unit of risk. Costco Wholesale is currently generating about -0.04 per unit of risk. If you would invest  693.00  in AGF Management Limited on December 27, 2024 and sell it today you would lose (23.00) from holding AGF Management Limited or give up 3.32% of portfolio value over 90 days.

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

AGF Management Limited  vs.  Costco Wholesale

AGF Management

Risk-Adjusted Performance

Very Weak

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

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 nearly stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AGF Management and Costco Wholesale

The main advantage of trading using opposite AGF Management and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGF Management 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 AGF Management Limited 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.